
Concept explainers
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.

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Chapter 2 Solutions
Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
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