Chapter 2, Problem 2MCQ

To determine

To Identify:

Correct statement from given statements.

Journal Entry:

It refers to the process of recording the data into books of accounts on continuous basis. It is a process of record keeping for every transaction by a company or a firm.

Rules of Journal Entry:

The rules for journal entry are defined by five accounting components.

• Assets:

Increase in asset should be debit and decrease should be credit.

• Liabilities:

Increase in liabilities should be credit and decrease should be debit.

• Equity:

Increase in Equity should be credit and decrease should be debit.

• Expense:

Increase in expense should be debit and decrease should be credit.

• Revenue:

Increase in revenue should be credit and decrease should be debit.