Which Of The Following Entries Records The Payment Of Insurance For The Current Month?

Which Of The Following Entries Records The Payment Of Insurance For The Current Month?

Cash, debit; Insurance Expense, credit. Prepaid Insurance, debit.

What are the rules of accounting?

  • Rule 1 – Debit the receiver, credit the giver.
  • Rule 2 – Debit what comes in, credit what goes out.
  • Rule 3 – Debit all expenses and losses and credit all incomes and gains.

Which of the following is the correct rule of debits and credits?

The following are the rules of debit and credit that guide the system of accounts, they are known as the Golden Rules of accountancy: First: Debit what comes in, Credit what goes out. Second: Debit all expenses and losses, and Credit all incomes and gains. Third: Debit the receiver, Credit the giver.

Which of the following is the correct rule of debits and credits?

Which is false regarding the rules of debit and credit?

It is false that the rules of debits and credits for liability accounts are the same as the rules for asset accounts. In an asset account, a debit entry increases the balance and a credit entry decreases the balance of the account.

What is the role of debit and credit?

In a nutshell: debits (dr) record all of the money flowing into an account, while credits (cr) record all of the money flowing out of an account.

What are the rules of debits?

All accounts that normally contain a debit balance will increase in amount when a debit (left column) is added to them and reduced when a credit (right column) is added to them. The types of accounts to which this rule applies are expenses, assets, and dividends.

What are the two primary rules of debits and credits?

The basic rules of debits and credits are: All accounts that usually have a debit balance will increase when a debit (left-hand side) is added, and decrease when a credit (right-hand side) is added.

How does the rule of debit and credit relate to the accounting equation?

By definition, the rules of debits and credits mirror the accounting equation: Assets = Liabilities + Equity. In debit and credit terms, Asset debits = Liability credits + Equity credits. The ending balances in equity accounts will therefore be credits so that the equation will balance.

How do you determine debit and credit in accounting?

For placement, a debit is always positioned on the left side of an entry (see chart below). A debit increases asset or expense accounts and decreases liability, revenue, or equity accounts. A credit is always positioned on the right side of an entry.

What are the 3 types of accounts?

3 Different types of accounts in accounting are Real, Personal, and Nominal Accounts. The real account is then classified into two subcategories – Intangible real account, and Tangible real account. Also, three different sub-types of Personal accounts are Natural, Representative, and Artificial.

Which of the following is not true about the accounting equation?

The accounting equation Assets = Liabilities – Owners’ Equity is not a true statement. Assets = Liabilities + Owner’s Equity is the proper accounting equation.

Which of the following is not true about the accounting equation?

What are DR and CR rules?

On a balance sheet or in a ledger, assets equal liabilities plus shareholders’ equity. An increase in the value of assets is a debit to the account, and a decrease is a credit.

What are the 3 books of accounts?

Cash book − only cash-related receipts and payments are recorded. General ledger − All business financial transactions. Debtor ledger − Provides information about credit sales (related to customers). Creditor ledger − Provides information about credit purchases (related to sellers).

Is equipment a debit or credit?

Let’s say you decide to purchase new equipment for your company for $15,000. The equipment is an asset, so you must debit $15,000 to your Fixed Asset account to show an increase. Purchasing the equipment also means you increase your liabilities.

What are the rules of credit?

Opposite to debits, the “credit rule” state that all accounts that normally contain a credit balance will increase in amount when credit is added to them and reduce when a debit is added to them. The types of accounts to which this rule applies are liabilities, equity, and income.

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