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%
-Which of the following is an example of a debit transaction?
A) a decrease in the inventory account
B) an increase in the revenue account
C) an increase in the trade receivables account
D) an increase in the trade payables account

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%
-Which of the following is an example of a debit transaction?
A) a decrease in the inventory account
B) an increase in the revenue account
C) an increase in the trade receivables account
D) an increase in the trade payables account

Quizplus · Accepted Answer

DC) An increase in the trade receivables account is a debit transaction because it represents money owed to the company, increasing an asset account. D) An increase in the trade payables account is also a debit transaction because it represents an increase in the company's obligations or liabilities, which is recorded on the credit side, but the question's phrasing implies looking for transactions that would typically involve a debit entry in the double-entry accounting system, and in practice, the increase in liabilities (trade payables) is balanced by a debit in another account (such as an expense or asset account), not a direct debit to the trade payables account itself. This explanation corrects the misinterpretation in the initial response.

Cost of the Asset$100,000