Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-What are debits and credits?
A) A debit is an increase in an asset or a decrease in a liability, and a credit is an increase in a liability and a decrease in an asset
B) A debit is an increase in a liability or a decrease in an asset, and a credit is an increase in an asset or a decrease in a liability
C) A debit is an increase in shareholders' equity, and a credit is a decrease in shareholders' equity
D) A debit is an increase in revenue or a decrease in expenses and a credit is a decrease in revenue and an increase in expenses entry

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-What are debits and credits?
A) A debit is an increase in an asset or a decrease in a liability, and a credit is an increase in a liability and a decrease in an asset
B) A debit is an increase in a liability or a decrease in an asset, and a credit is an increase in an asset or a decrease in a liability
C) A debit is an increase in shareholders' equity, and a credit is a decrease in shareholders' equity
D) A debit is an increase in revenue or a decrease in expenses and a credit is a decrease in revenue and an increase in expenses entry

Quizplus · Accepted Answer

A debit increases assets or decreases liabilities, while a credit does the opposite, increasing liabilities or decreasing assets. This is a fundamental principle in accounting.

Cost of the Asset$100,000