Question

16. Consider the following statements with regard to the accounting treatment of various accounts: i. Increase in asset is debited and decrease in asset is credited. ii. Increase in expenses/losses is debited and decrease in expenses/ losses is credited. iii. Increase in liabilities is credited and decrease in liabilities is debited. iv. Increase in capital is credited and decrease in capital is debited. Identify the correct statement/statements: a. i and ii b. i, iii and iv c. i, ii, iii and iv d. ii and iii​

Answer 1

Answer:

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Answer 2

Answer:

All accounts are divided into five categories for the purposes of recording the transactions (i) Asset (ii) Liability (iii) Capital (iv)Expenses/Losses (v) Revenues/Gains

Two fundamental rules are the followed to record the changes in these accounts

(i) For recording changes in Assets/Expenses (losses)

(a) "Increase in asset is debited and decrease in asset is created."

(b) " Increase in expenses/losses is debited and decrease in expenses/losses is credited."

(ii) For recording changes in liabilities and Capital/Revenues (Gains)

(a) " Increase in liabilities is created and decrease in liabilities is debited.'

(b) " increase in capital is created and decreases in capital is debited.'

(iii)" Increase in revenue/gain is credited and decrease in revenue /gain is debited."

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