Question

Check my o Which of the following accounts is increased with a debit? 0:32:08 Multiple Choice Insurance expense Service revenue Accounts payable Common stock 10 of 20 ! Next > < Prev

Answer 1

The following are the classification of Accounts and the rules of debt and credit applicable respectively.

Assets: Assets are things you own such as cash, accounts receivable, bank accounts, furniture, and computers Debit when it is increased and Credit when it is decreased.

Liabilities: Liabilities include things you owe such as accounts payable, notes payable, and bank loans Credit when increased and Debit when decreased.

Revenue: Revenue is the money your business is paid for the sale of products and services Debit when decreased and Credit when increased.

Expenses: Expenses are considered the cost of doing business and include things such as office supplies, insurance, rent, payroll expenses, and postage Debit when increased and Credit when decreased.

Capital/Owner Equity: The Capital/Owner Equity account represents your financial interest in the business Credit when increased and Debit when decreased.

1. Insurance expense - Expense nature account.

It is the nature of expenses account, where it is debited when increased,i.e. when expenses are occured it is debited.

2. Service Revenue - Revenue nature account

The service will be performed at the same time as the cash was received, the revenue account - Service Revenues is credited, thus increasing its account balance. Accounts Receivable is an asset account and is increased with a debit; Service Revenues is increased with a credit.

3.Accounts payable - It is liability nature account.

When a liability is arises, the duty to pay off increases and accounts office will be credited and When you pay off the invoice, the amount of money you owe decreases (accounts payable). Since liabilities are decreased by debits, you will debit the accounts payable.

4. Common stock - It is in the nature of capital account

When the capital is issued it is credited and on buy back of capital it is credited.

Hence option I - Insurance expenses is the correct answer where the insurance Expense account will get debited when it is increased. When the expenses are incurred the entry will be

Expenses a/c Dr.

To Bank/ Cash.