Which of the following statements is incorrect regarding capital account?
Correct answer: D. Debit increases the capital account balance
- A. Net income increases the capital account balance
- B. Credit increases the capital account balance
- C. Fresh capital increases the capital account balance
- D. Debit increases the capital account balance
Explanation
Capital normally has a credit balance, so a credit, fresh investment, or net income increases it. A debit normally reduces capital, making statement a incorrect.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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