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Hi Everyone 🙂
I would like to ask a question regarding profit, where does it increase in? Debit or Credit?
There is no ‘everyone’ in this forum!
This forum is ‘Ask the Tutor’ and I am the tutor and so it is always me who answers 🙂Your question as you have written it does not make any sense.
The profit (or loss) is the balance on the Income Statement t-account, and is transferred to either the capital account (if it is a sole trader) or to the retained earnings account (if it is a limited company). If it is a profit then we credit one of those two accounts, if it is a loss then we debit one of those two accounts.
I do suggest that you watch our free lectures.
Our free lectures are a complete course for Paper F3 and cover everything needed to pass the exam well.Sorry if I was a bit rude there sir.
Here is the actually question:
Which of the following is incorrect?
A. A Debit entry increases assets
A Debit entry increases drawings
A Credit entry increases profit
B. A Debit entry decreases liabilities
A Credit entry increases capital
A Credit entry increases profit
C. A Credit entry decreases assets
A Debit entry increases drawings
A Debit entry increases profit
D. A Credit entry increases liabilities
A Credit entry increases capital
A Debit entry decreases profitI think the answer would be either A or C but the last part of each statement (A Debit or Credit entry increases profit) confuses me a bit.
Thank you in Advance Mr. Moffat! God Bless 🙂
Sorry sir but I didn’t quite get that. You said a credit entry increases profit? But it says there in C. A “Debit” entry increase profit.
I know it does – that is why C is the correct answer!!
The question asks which one is incorrect!!
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