ACCOUNTING 1: DEBITS AND
CREDITS PRACTICE
By Mr. Duvall
PROBLEM 4-2, PAGE 88 (ANSWER)
1. a. Office Equipment (asset) is increased (debit).
 1. b. Accounts Payable (liability) is increased
(credit).
 2. a. Office Furniture (asset) is increased (debit).
 2. b. Alice Roberts, Capital (owner’s equity) is
increased (debit).
 3. a. Accounts Payable (liability) is decreased
(debit).
 3. b. Cash in Bank (asset) is decreased (credit).

WHAT’S WRONG HERE?
Description

The business bought office supplies on account for
$850.
Transaction Analysis
Account
Category
Increase/Decr
ease
Debit
Amount
Office
Supplies
Asset
Increase
$850
Accounts
Payable
Liability
Increase
$850
Credit
Amount
$850
WHAT’S WRONG HERE?
Description

The business paid $200 on account to Northern Office
Supplies.
Transaction Analysis
Account
Category
Increase/Decr
ease
Debit
Amount
Accounts
Payable
Asset
Liability
Decrease
$200
Cash
Asset
Decrease
Credit
Amount
$200
WHAT’S WRONG HERE?
Description

The business received $200 payment on account from
customer Harry Navel.
Transaction Analysis
Account
Category
Increase/Decr
ease
Debit
Amount
Cash
Asset
Increase
$200
Accounts
Payable
Receivable
Liability
Asset
Decrease
Credit
Amount
$200
WHAT’S WRONG HERE?
Description

The owner transferred a computer of her own valued
at $1,100 to the business.
This one is a-ok!
Transaction Analysis
Account
Category
Increase/Decr
ease
Debit
Amount
Computer
Equipment
Asset
Increase
$1,100
Capital,
Owner
Owner’s
Equity
Increase
Credit
Amount
$1,100
WHAT RULES DO YOU SEE SO FAR?
Even with double-entry accounting, the
accounting equation still stays in balance
 Each transaction has a debit and a credit
 Each transaction affects at least two accounts
 An asset’s increase side (debit) is the opposite of
the increase side for liabilities and owner’s equity
(both credit)

WHAT RULES DO YOU SEE SO FAR?
(CONTINUED)
If a transaction affects an asset and a liability,
both will increase (or decrease)
 If a transaction affects an asset and owner’s
equity, both will increase (or decrease)
 If a transaction affects two asset accounts, one
will increase and one will decrease
 In the book examples, the debit side of the
transaction is always first, and the credit side is
always second
