State BPA Fundamental Accounting Practice Exam

How do you increase a revenue account?

1. With a debit

2. With a credit

3. With a transfer

4. With an adjustment

The correct answer is: With a credit

Increasing a revenue account requires a credit entry. In accounting, revenue accounts are part of the equity section in the accounting equation, whereby increased revenues enhance the overall equity of the business. When a company earns revenue, it records the amount as a credit, reflecting the increase in the revenue account. This is rooted in the double-entry accounting system, where each transaction affects at least two accounts. Credits increase revenue accounts, while debits are used to decrease them. The other methods listed—transfers and adjustments—do not specifically pertain to the concept of increasing a revenue account. Transfers generally refer to moving funds between accounts, and adjustments are commonly used for corrections or reallocations within accounts but do not inherently increase revenues. Understanding this fundamental aspect of accounting is key to managing and reporting financial activities accurately.