Which of the following statements about debits and credits is true? A) Debits decrease asset accounts and expenses. B) Credits increase asset accounts and expenses. C) Credits decr... Which of the following statements about debits and credits is true? A) Debits decrease asset accounts and expenses. B) Credits increase asset accounts and expenses. C) Credits decrease liability and equity accounts. D) Debits increase expense and dividend accounts.
Understand the Problem
The question is asking which statement regarding debits and credits in accounting is correct. The context revolves around the rules of accounting transactions related to asset, expense, liability, and equity accounts. To answer this, we will evaluate each option based on the standard accounting principles.
Answer
Debits increase expense and dividend accounts.
The true statement is: Debits increase expense and dividend accounts.
Answer for screen readers
The true statement is: Debits increase expense and dividend accounts.
More Information
In accounting, debits and credits are entries that record changes in financial statement items. Debits increase asset and expense accounts, while credits increase liability, revenue, and equity accounts.
Tips
A common mistake is confusing the effects of debits and credits on different types of accounts (assets, liabilities, equity, expenses, revenues). Remembering which accounts increase with debits or credits can help avoid errors.
Sources
- How to Calculate Credit and Debit Balances in a General Ledger - investopedia.com
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