Chapter 2, Problem 3QS

To determine

Asset: It refers to all valuable items that a company owns or items that generate some income to the company whether tangible or intangible. The more assets a company owns, the stable its financial position would be.

Accounting rule for assets is,

• Increase in assets is always debited.
• Decrease in assets is always credited.

Liability: It refers to all items that have some monetary value in market and that company owes from others. The liability is much important for a company for financial support.

Accounting rule for liabilities is,

• Increase in liabilities is always credited.
• Decrease in assets is always debited.

Equity: It refers to the contribution that an owner makes to the company. The more equity the company has, the more profitable the company would be.

Accounting rule for equity is,

• Increase in equity is always credited.
• Decrease in equity is always debited.

Revenue: It refers to the amount related with the incomes that a company earns form its operations and transactions.

Accounting rule for revenue is,

• Increase in revenue should be credited.
• Decrease in revenue should be debited.

Expense Account: It refers to the amount related with the expenditure that a company incurs for its efficient running and operations.

Accounting rule for expense account is,

• Increase in expense should be debited.
• Decrease in expense should be credited.

To identify: Accounts that are either an asset (A), liability (L), equity (EQ), revenue (R) or expense (E) account along with their identification number.

a.