Profit

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 profit I 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 :)

The answer is C. In this context, a credit entry increases profit.

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!!

Oh I get it now sir. Thank you very much for your response :) God Bless!

You are welcome :-)