FSA Credit/Debit

I came across 2 questions from the QBank with answers that used terminalogy of credit/debit with somewhat conflicting uses; if anyone can elaborate A firm is purchasing equipment for its operations. The equipment has a useful life of 7 years. On the firm’s financial statements the equipment should be recorded as a: A) credit to property, plant and equipment and a debit to cash. B) debit to property, plant and equipment and a credit to cash. C) debit to property, plant and equipment and a credit to depreciation expense. D) debit to property, plant and equipment and a credit to stockholder’s equity. Your answer: A was incorrect. The correct answer was B) debit to property, plant and equipment and a credit to cash. The firm should record a debit to property, plant, and equipment, and a credit to cash for the purchase of the equipment. Depreciation is expensed after the asset is in use. When a bond matures, the accounting entry is a debit to: A) long-term liability and a credit to cash. B) cash and a credit to long-term liability. C) expense and a credit to long-term liability. D) long-term liability and a credit to expense. Your answer: A was correct! At the time of maturity a bond will generate an entry to decrease (credit) cash and decrease (debit) long-term liability. This transaction makes the market value of the bond equal to its book value.

It seems to be using credit as in increase to liability but a decrease to asset and debit as a decrease to to liability and an increase to asset. Does this make sense? TIA

zoser55 Wrote: ------------------------------------------------------- > It seems to be using credit as in increase to > liability but a decrease to asset > and debit as a decrease to to liability and an > increase to asset. > > Does this make sense? > > TIA Yes, it does. For balance sheet items: Assets have a debit balance, thus, you increase assets by debit, and decrease by credit; Liabilities and Owner’s Equity items have a credit balance, thus you increase them by crediting and decrease by debiting. Total Assets (debit balance) = Liabilities (credit balance) + Owners’ Equity (credit balance).