Question

Question 1

1. An increase in a liability is done by a………….                                             (2.5 marks)
2. An increase in an asset account is done by a……                                        (2.5 marks)
3. A decrease in liability is done by a………                                                      (2 .5marks)
4. A decrease in an asset is done by a………                                                   (2.5 marks)
5. An increase in revenue is done by a……                                                      (2 .5marks)
6. If you receive a telephone bill, is your expense increasing or decreasing?   (2.5 marks)
7. If you pay salaries, is your expense increasing or decreasing?                        (2.5 marks)
8. If you purchase a motor vehicle, is your asset value increasing or decreasing? (2.5 marks)
9. If you take out a bank loan is your liability increasing or decreasing?                (2.5marks)
10. If you refund fees paid by a customer is your revenue increasing or decreasing? (2.5 marks)

(Total 25 marks)

Answer 1

When expense increases it is debited to income statement. When income is generated it is credited to income statement.

Double entry accounting system records transaction in which one account is debited and another account is credited.

a) An increase in a liability is done by a Credit

b) An increase in an asset account is done by a Debit

c) A decrease in liability is done by a debit

d) A decrease in an asset is done by a credit

e) An increase in revenue is done by a credit

f) If you receive a telephone bill, is your expense increasing or decreasing .

Telephone bill is an expense which will have to be paid. so it is an expense for the company.

Expense- Increasing

g) If you pay salaries, is your expense increasing or decreasing?  

salaries is an expense which will have to be paid. so it is an expense for the company.

Expense- Increasing

h) If you purchase a motor vehicle, is your asset value increasing or decreasing

Motor vehicle is an asset for the company from which future benefit will be received..Motor vehicle is debited and cash/accounts payable is credited.

Asset value= Increasing

i) If you take out a bank loan is your liability increasing or decreasing?

Bank loan is to be paid back as per banks term.

When bank loan is taken cash is debited and loan is credited.

Bank loan = liability increasing

J) If you refund fees paid by a customer is your revenue increasing or decreasing?

When fees is gien back it mean the income of the company is reduced.

Revenue =decreasing

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