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level: Basic Financial Accounting and Reporting

Questions and Answers List

Accounting equation and double entry system

level questions: Basic Financial Accounting and Reporting

Question	Answer
Present economic resource controlled by the entity as a result of past events.	Asset
A present obligation of the entity to transfer an economic resource as a result of past events	Liability
The residual interest in the assets of the entity after deducting all its liabilities	Equity
Increase in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims	Income
Decrease in assets, or an increase in liabilities, that results in decreases in equity, other than those relating to distributions of holders of equity claims.	Expenses
What do you call the "Assets = Liabilities + Owner's Equity"	Accounting Equation
If the assets increases, which side of the T-accounts is used?	Left Side
If the assets decreases, which side of the T-accounts is used?	Right Side
If the liability increases, which side of the T-accounts is used?	Right Side
If the liability decreases, which side of the T-accounts is used?	Left Side
If the owner's equity increases, which side of the T-accounts is used?	Right Side
If the owner's equity decreases, which side of the T-accounts is used?	Left Side
If the expenses is increases, which side of the T-accounts is used?	Left Side
If the expenses decreases, which side of the T-accounts is used?	Right Side
If the revenue or income increases, which side of the T-accounts is used?	Right Side
If the revenue or income decreases, which side of the T-accounts is used?	Left Side
Asset's normal balance	Debit
Liability's normal balance	Credit
Owner's Equity's normal balance	Credit
Expenses' normal balance	Debit
Revenue/Income normal balance	Credit
Capital's normal balance	Credit
Withdrawal's normal balance	Debit