Which of the following pairs increase with credit entries? A. supplies and retained earnings B.

step 1 So let's start the solution. First of all we will we will define five type of accounts throughou

Which of the following pairs increase with credit entries?...

Key Concepts

Debit and Credit

Debit and credit are the fundamental dual aspects of every accounting transaction. Each transaction is recorded in at least two accounts where one account is debited and another is credited, ensuring that the accounting equation remains balanced.

Normal Balance of Accounts

Every account type has a normal balance which indicates whether it is increased by debits or credits. Typically, asset and expense accounts have a normal debit balance, while liability, equity, and revenue accounts have a normal credit balance.

Financial Statement Accounts Classification

Accounts are grouped into categories such as assets, liabilities, equity, revenues, and expenses. Recognizing these classifications is crucial, as it explains why certain accounts increase on the credit side (like liabilities, equity, and revenue) while others increase on the debit side (like assets and expenses).

Transcript

00:01 So let's start the solution.

00:03 First of all we will we will define five type of accounts throughout the accounting subject followed by that diamond rules of accounting that will be applicable on recording on of the financial transaction in the books up accounts of the company.

00:18 Okay.

00:20 So first is assets.

00:27 What are assets? they are nothing but the amount recoverable from the customers.

00:36 After we have sold inventory to them okay cash bank balance the entity has okay like let's suppose we are we are into business of selling selling printers or computers to our customers so obviously if if we make cash sales to them so they will be a cash and bank balance we are maintaining at our entity level okay so the cash and bank will be concerned considered in assets.

01:19 Okay, likewise inventory.

01:25 Inventry is like you have, let's suppose you have before you selling, before you sell the printer to the customer, you purchase different parts of the printer from your suppliers.

01:41 So that becomes your inventory.

01:45 That it is a raw material which is processed by your company to make it a complete printer.

01:54 Okay.

01:54 Which is sold to the customers.

01:57 Then come to liabilities.

02:06 Okay, what are liabilities? liabilities are in contrast to assets.

02:16 Let's just suppose if we are into business of selling printers and we have purchased some different parts of printer from our supplier, but we have not paid them.

02:28 So that part, that amount will become a pay amount.

02:34 Like we have to pay that amount.

02:36 That amount in later point in time okay also a payment suppose you take loan from the bank to purchase house and different types of properties or vehicles or any type of property that you want to purchase so there are short and long -term loans which will be classified under which will be classified under liabilities after that we have assets after that we have capital capital let's suppose we are willing to start the business but we are short of funds as of now so we will go to our relative friends different types of investors to raise the funds okay so there are different medium through which we can raise the funds however there are very very dominant or we can say very popular method of raising the funds which are equity shares preference shares i would request all of you to write down what i'm writing down why because it will become very very easy to revise everything before the exam at the first time so that it will be very very clear to you now expense everyone will be will be familiar with expenses so every expense for business purpose okay for business purpose only let's suppose if the if the business man is considering the expense of marriage or part of any type of party arrangement in its business to reduce the profit down that will not be the case so that will be considered as a tax avoidance matter so that will that will not be possible the fifth type of account we have revenue like with the expenses this is similar but in contrast to expenses like sales other income like that so we have five type of accounts for these five type of accounts we have diamond rules of accounting please noted down this also because throughout the accounting diamond rules of accounting are most popular and these have been you know just invented i guess i guess five to six years back before that they were only golden rules of accounting are followed by that we will come to our main solution because before deriving the solution we also need to know that what is the basis of the solution we have derived okay so increase in assets expenses will always be debit what is the meaning of this they will understand it decrease in assets expenses equals to credit it is simply that let's suppose we have increased in our assets in terms of cash in terms of inventory like the items we have noted down in the first sheet okay so we will make a corresponding debit of the amount in the books of accounts of the company okay decrease in liabilities capital revenue equals to debit okay so these are the account diamond rules of accounting that will be applicable on five type of accounts whenever there will be a financial transaction we will use these account diamond rules to record the journal entry in the books of accounts of the company followed by that what is the requirement of the question the requirement of question which type of which type which is the which pair out of the given four pairs of the accounts will be increased or will be increased with credit entries...

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