Question

Indicate whether the following accounts generally will have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. (1)Cash. (2)Accounts Receivable. (3)Dividends. (4)Accounts Payable. (5)Salaries and Wages Expense. (6)Service Revenue.

Answer 1

Answer:

Consider the following equation:

Assets = Equity + Liability......................Equation1

As

Equity = Share Capital + Retained Earnings

And

Retained earnings = Sales - Expenses - Dividends paid

Now by putting values in the equation 1:

Assets = (Share Capital + Sales - Expenses - Dividends paid) + Liability

Assets + Expenses + Dividends paid = Share Capital + Sales + Liability

Now remember that the figures that are on the left are debit in nature and figures in the right are credit in nature.

As we know cash and accounts receivable are assets in nature so these will be debited. The dividends clearly would be debited on the basis of the above equation and the salaries and wages which are expense in nature should be debited.

Now the Accounts payable is liability and must be credited and Sales which is also credit in nature must be credited.

The mention cases considers the increase in them which is the general case. If these narratives decreases then the debit entry would convert into credit.