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Learning Objective 02-C2: Define debits and credits and explain double-entry accounting.

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Debit refers to left, and credit refers to right. Debits increase assets, expenses, and dividends while credits decrease them. Credits increase liabilities, common stock, and revenues; debits decrease them. Double-entry accounting means each transaction affects at least two accounts and has at least one debit and one credit. The system for recording debits and credits follows from the accounting equation. The left side of an account is the normal balance for assets, dividends, and expenses, and the right side is the normal balance for liabilities, common stock, and revenues.

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Required information

Learning Objective 02-C2: Define debits and credits and explain double-entry accounting.

Skip to question

Debit refers to left, and credit refers to right. Debits increase assets, expenses, and dividends while credits decrease them. Credits increase liabilities, common stock, and revenues; debits decrease them. Double-entry accounting means each transaction affects at least two accounts and has at least one debit and one credit. The system for recording debits and credits follows from the accounting equation. The left side of an account is the normal balance for assets, dividends, and expenses, and the right side is the normal balance for liabilities, common stock, and revenues.

Double-Entry Accounting

Knowledge Check 01

With double-entry accounting, each transaction requires:

Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.

check all that apply

• that at least three accounts are affected.
• that the total debits equal the total debits.
• that at least two accounts are affected.
• that the total debits will equal the total credits.