Accounting Fundamentals Certification (AFC) Practice Test

The asset account is increased by which type of journal entry?

1. Credit

2. Debit

3. Adjustment

4. Reclassification

The correct answer is: Debit

The asset account is increased by a debit journal entry. In accounting, assets are recorded on the balance sheet and increase in value are shown through debits. When a company acquires an asset, it is customary to debit the asset account to reflect this change. For instance, if a company purchases equipment, the equipment account would be debited, resulting in an increase in total assets on the balance sheet. Conversely, a credit entry would decrease the asset account, reflecting a reduction in the company's assets, such as when an asset is sold or disposed of. The terms adjustment and reclassification generally pertain to different accounting processes. Adjustments often involve corrections or reallocations, while reclassification changes the category of an asset on the balance sheet, neither of which inherently increases the asset account.