The Rules of Debit and Credit May Be Summarized as Follows

question 87

Multiple Choice

The rules of debit and credit may be summarized as follows:

• A) Accounts on the left side of the balance sheet are increased by debits, whereas, accounts on the right side of the balance sheet are increased by credits.
• B) The balance of a ledger account is increased by debit entries and is decreased by credit entries.
• C) Accounts on the left side of the balance sheet are increased by credits, whereas accounts on the right side of the balance sheet are increased by debits.
• D) The balance of a ledger account is increased by credit entries and is decreased by debit entries.

---

Definitions:

Economic Profit

The surplus remaining after deducting total costs from total revenues, including both explicit and implicit costs, and representing a measure of economic efficiency.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Accounting Profit

The total revenue of a business minus the explicit costs, representing the financial gain on its income statement.

Economic Cost

The total cost of choosing one action over another, including both the costs incurred and the opportunity costs of forgone alternatives.