___________ and __________ are used to increase (or decrease) the equity account.

Journal entries are the fundamental method for recording financial transactions in double-entry bookkeeping. The equity account, which represents the owners' stake in the company, has a normal credit balance. To increase the equity account (e.g., through owner investment or revenue), a credit is recorded. To decrease the equity account (e.g., through owner withdrawals or expenses), a debit is recorded. The question asks what is used to "increase (or decrease)" the account. While both debits and credits are used, Option C provides the two components for the primary action of increasing the account, which aligns with its normal balance. Option B is too general; a "transaction" is an economic event, not the specific accounting mechanism (debit/credit) used within the journal entry to effect the change.

A. Journal Entries & Debit: A debit is used to decrease an equity account, not increase it. This option is incomplete as it only addresses one part of the account's behavior.
B. Journal Entries & transactions: A transaction is the underlying economic event, not the accounting entry itself. The journal entry records the transaction using debits and credits. This option is procedurally correct but lacks mechanical precision.
D. None of all: Option C provides a correct, albeit specific, description of the accounting mechanics for increasing the equity account, making this choice incorrect. ---

1. ACFE. (2023). Fraud Examiners Manual

International Edition.

Section 2

"Financial Transactions and Fraud Schemes

" pages 2.13-2.14

explains the rules of debits and credits. It states

"To increase an equity account

the account is credited. To decrease an equity account

the account is debited." This confirms that credits increase equity.

2. Weygandt

J. J.

Kimmel

P. D.

& Kieso

D. E. (2018). Financial Accounting (10th ed.). Wiley.

Chapter 2

"The Recording Process

" details the relationship between journal entries

debits

credits

and account balances. It explicitly states that owner's capital

a primary equity account

is increased by credits and decreased by debits.

3. MIT OpenCourseWare. (2004). 15.511 Financial Accounting

Fall 2004. Massachusetts Institute of Technology.

Lecture Notes

"Session 3: The Accounting Cycle

" outlines that transactions are recorded in journals and that for equity accounts

credits represent increases and debits represent decreases. This supports that "Journal Entries" and "Credit" are the tools used to increase the account.