2.2 Explain debits, credits, and the double entry system of accounting
1) Double-entry accounting requires that every business transaction impacts at least two different accounts.
2) The debit (left) side of an account always indicates an increase in the value of the account.
3) A T-account is a way to visualize the increases and decreases to the value of an account.
4) Accounts that decrease on the credit side are liabilities, common shares, revenues, and retained earnings.
5) The credit (right) side of an account shows an increase or decrease depending upon the type of account.
6) Accounts that increase on the credit side are assets, dividends, and expenses.
7) Normal balance refers to the positive increase of an account and identifies the side of the account (Debit or Credit) to which this positive balance is recorded.
8) Which of the following is an unofficial tool of accounting?
A) Account
B) T-account
C) Debit
D) Credit
E) Accountant
9) Accounts payable, taxes payable, and notes payable increase on the debit side and decrease on the credit side.
10) The T-account aids in separating:
A) increases and decreases in an account.
B) the equality of the credits.
C) the equality of debits and credits in the accounting equation.
D) the balances of all of the accounts.
E) errors and omissions.