Which pair of accounts follows the rules of debit and credit, in relation to increases and decreases, in the same manner?
A. Accounts Payable and Rent Expense
B.Repair Expense and Notes Payable
C.Prepaid Insurance and Advertising Expense
D.Service Revenues and Equipment
Cash and rent expense
The answer is D. Service Revenues and Equipment.
In the accounting system, increases and decreases are recorded through the use of debit and credit entries. Debits are used to increase assets and expenses, while credits are used to decrease assets and expenses.
In option D, "Service Revenues" represents revenue earned from providing services, and revenue accounts are increased through credits. On the other hand, "Equipment" represents an asset, and assets are increased through debits. Therefore, both accounts follow the rules of debit and credit, in relation to increases and decreases, in the same manner.
To determine which pair of accounts follows the rules of debit and credit in the same manner, we need to understand how debit and credit affect the balance of an account.
In accounting, debit and credit are used to record transactions. Here's how they work:
1. Debit: An entry on the left side of an account. It represents an increase in assets, expenses, or dividends or a decrease in liabilities, equity, or revenue.
2. Credit: An entry on the right side of an account. It represents an increase in liabilities, equity, or revenue, or a decrease in assets, expenses, or dividends.
Now let's analyze each pair of accounts:
A. Accounts Payable and Rent Expense
Accounts Payable is a liability account, and Rent Expense is an expense account. According to the rules of debit and credit, an increase in Accounts Payable is recorded as a credit, while an increase in Rent Expense is recorded as a debit. Therefore, this pair does not follow the rules of debit and credit in the same manner.
B. Repair Expense and Notes Payable
Repair Expense is an expense account, and Notes Payable is a liability account. Both accounts follow the rules of debit and credit in the same manner. An increase in Repair Expense is recorded as a debit, and an increase in Notes Payable is recorded as a credit.
C. Prepaid Insurance and Advertising Expense
Prepaid Insurance is an asset account, and Advertising Expense is an expense account. These accounts follow the rules of debit and credit in opposite manners. An increase in Prepaid Insurance is recorded as a debit, while an increase in Advertising Expense is recorded as a credit.
D. Service Revenues and Equipment
Service Revenues is a revenue account, and Equipment is an asset account. Both accounts follow the rules of debit and credit in the same manner. An increase in Service Revenues is recorded as a credit, and an increase in Equipment is recorded as a debit.
Based on this analysis, the pair of accounts that follows the rules of debit and credit in the same manner is:
B. Repair Expense and Notes Payable