Study Module and Homework Questions

Questions I didn’t know:

• Service Revenue earned on account would cause Account Receivable, an asset, to increase (debit) and Service Revenue, an equity account, to increase (credit).

• The debt ratio can be expressed as Total Liabilities / Total Assets.

Questions I struggled with:

• Cash and Accounts Receivable are asset and assets normally have debit balances. Liabilities and Retained Earnings normally have credit balances.

• Rent paid in advanced is considered an asset, so Prepaid Rent increases (debited). It is paid in cash, so Cash decreases (credited). The Prepaid Rent is a future benefit, not a current Rent Expense.