# Transactions That Affect Assets, Liabilities And Owner's Equity

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| By Mattie M. Miller
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Mattie M. Miller
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Quizzes Created: 1 | Total Attempts: 481
Questions: 13 | Attempts: 481

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ANSWER TRUE/FALSE TO THE QUESTIONS LISTED BELOW:

• 1.

### 1.  The normal balance side of a Cash account is credit.

• A.

True

• B.

False

B. False
Explanation
The normal balance side of a Cash account is debit. This is because Cash is an asset account, and assets have a normal debit balance. A debit entry increases the balance of a Cash account, while a credit entry decreases it. Therefore, the correct answer is False.

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• 2.

### 2.  The normal balance side for an asset account is the debit side.

• A.

True

• B.

False

A. True
Explanation
The normal balance side for an asset account is the debit side because assets are considered positive and are typically increased with debits and decreased with credits. Debits represent additions or increases to an asset account, while credits represent reductions or decreases. Therefore, the debit side is the normal balance side for an asset account.

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• 3.

### 3.  "Debit" means the increase side of an account.

• A.

True

• B.

False

B. False
Explanation
The statement is incorrect. "Debit" actually refers to the left side of an account, while "credit" refers to the right side. In accounting, debits are used to record increases in assets and expenses, while credits are used to record increases in liabilities, equity, and revenue. Therefore, the correct answer is False.

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• 4.

### 4.  A credit to a liability account decreases the account balance.

• A.

True

• B.

False

B. False
Explanation
A credit to a liability account actually increases the account balance. In accounting, credits are used to record increases in liabilities, equity, and revenue accounts, while debits are used to record increases in asset and expense accounts. Therefore, a credit to a liability account would indicate an increase in the amount owed by the company, resulting in a higher account balance.

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• 5.

### 5.  Assets are increased on the debit side.

• A.

True

• B.

False

A. True
Explanation
Assets are increased on the debit side because the accounting equation states that assets are equal to liabilities plus owner's equity. Debits increase assets and credits decrease assets. Therefore, when an asset is increased, it is recorded on the debit side of the accounting equation. This is a fundamental principle in double-entry accounting, where every transaction has equal debits and credits to maintain the balance of the equation.

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• 6.

### 6.  Capital is increased on the credit side

• A.

True

• B.

False

A. True
Explanation
When capital is increased on the credit side, it means that there has been an increase in the owner's equity or investment in the business. This can happen when the owner invests additional funds or when the business generates profits. The credit side of an account represents increases in liabilities, revenues, and owner's equity, while the debit side represents decreases. Therefore, an increase in capital would be recorded on the credit side of the capital account. Hence, the given answer "True" is correct.

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• 7.

### 7.  Liabilities are decreased on the credit side.

• A.

True

• B.

False

B. False
Explanation
Liabilities are not decreased on the credit side. In accounting, liabilities are recorded on the credit side of the balance sheet. When a liability is decreased, it is recorded on the debit side. Therefore, the statement is false.

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• 8.

### 8.  the basic accounting equation MAY be expressed as A - L = OE

• A.

True

• B.

False

A. True
Explanation
The basic accounting equation is expressed as Assets minus Liabilities equals Owner's Equity. Therefore, the correct answer is true.

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• 9.

### 9.  The right side of a T account is always the debit side.

• A.

True

• B.

False

B. False
Explanation
The given statement is false. The right side of a T account is always the credit side, not the debit side. In accounting, the left side of the T account represents the debit side, while the right side represents the credit side. Debits are used to record increases in assets and expenses, while credits are used to record increases in liabilities, equity, and revenue. Therefore, the correct answer is False.

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• 10.

### 10.  For every debit there must an equal credit.

• A.

True

• B.

False

A. True
Explanation
This statement is based on the fundamental accounting principle of double-entry bookkeeping. According to this principle, every financial transaction affects at least two accounts, with one account being debited and another account being credited. This ensures that the accounting equation (assets = liabilities + equity) remains in balance. Therefore, for every debit entry made in one account, there must be an equal credit entry made in another account. This ensures accurate and balanced recording of financial transactions.

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• 11.

### 11.  A debit to one asset account and a credit to another asset account will result in the basic accounting equation being out of balance.

• A.

True

• B.

False

B. False
Explanation
A debit to one asset account and a credit to another asset account will not result in the basic accounting equation being out of balance. The basic accounting equation states that assets equal liabilities plus equity. When a debit is made to one asset account, it increases the total assets, and when a credit is made to another asset account, it decreases the total assets. However, since both sides of the equation are affected equally, the equation remains in balance. Therefore, the statement is false.

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• 12.

### 12.  The left side of a T Account is always the credit side.

• A.

True

• B.

False

B. False
Explanation
The left side of a T Account is not always the credit side. In accounting, the left side of a T Account represents the debit side, while the right side represents the credit side. The debit side is used to record increases in assets and expenses, while the credit side is used to record decreases in assets and expenses, as well as increases in liabilities, equity, and revenue. Therefore, the correct answer is False.

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• 13.

### 13.  Credit means to decrease a liability.

• A.

True

• B.

False

B. False
Explanation
Credit does not necessarily mean to decrease a liability. In accounting, credit refers to the right side of a balance sheet, which represents an increase in liabilities or a decrease in assets. It can also refer to recording an entry on the right side of a ledger account. Therefore, credit can either increase or decrease a liability depending on the context.

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• Current Version
• Mar 21, 2023
Quiz Edited by
ProProfs Editorial Team
• Sep 28, 2009
Quiz Created by
Mattie M. Miller