Question

Chapter 2: Analyzing Transactions There are two accounts that are increased with debits. Please tell us what those accounts are and on which financial statement they appear. There are three accounts that are increased with credits. Please name those accounts and indicate on which financial statement they appear. When you are analyzing business transactions, at least two accounts are affected. Those two accounts can have increases to each account. Those two accounts can also have decreases to each account. So here's something very important to consider when analyzing transactions: You can have two increases. You can have two decreases. You can have an increase and a decrease. You can never have a debit without a credit. When analyzing transactions, the debits must always equal the credits. 1. Please give us an example of a transaction where there are two increases. Note that you will still need to have at least one debit and one credit. Indicate which account will be debited and which will be credited. 2. Please give us an example of a transaction where there are two decreases. Note that you will still need to have at least one debit and one credit. Indicate which account will be debited and which will be credited. 3. Please give us an example of a transaction where there is an increase and a decrease. Note that you will still need to have at least one debit and one credit. Indicate which account will be debited and which will be credited.

Answer 1

1: Purchases on credit will increase Purchases and will increase the creditors.

Entry will be

Purchases-Dr

Creditors- Cr

2: When a loan is paid off, the loan amount decreases and the cash asset also decreases.

Entry is

Loan -Dr

Cash -Cr

3: When a debtor pays off his liability, the cash account increases and the debtors decrease.

Entry is

Cash-Dr

Debtors- Cr