True or False?

" In recording for the business transactions, debits mean an increase and credit means a decrease."

Question

True or False?

" In recording for the business transactions, debits mean an increase and credit means a decrease."

BlackTom AI · Accepted Answer

Before diving into the options, note that this statement hinges on the type of account being affected in double-entry accounting.
Option 1: True. The claim that debits always mean an increase and credits always mean a decrease is incorrect because debits and credits have different effects depending on the account type. For asset accounts, a debit increases and a credit decreases; for liability and equity accounts, a debit decreases and a credit increases; for revenue, a debit decreases and a credit increases; for expenses, a debit increases and a credit decreases. Given these varied effects, saying debits always increase and credits always decrease is a simplification that does not hold across all accounts.
Option 2: False. This is correct because the impact of a debit or credit is not universally an increase or a decrease. The effect depends on which account is affected: asset and expense accounts generally rise with debits, but liability, equity, and revenue accounts generally fall with debits and rise with credits. This nuanced behavior is the cornerstone of the double-entry system and explains why the blanket statement is false.
Thus, the statement is false because it ignores the account-type-specific rules that govern how debits and credits affect balances.

BACC012 Week 1: Practice Quiz

True or False? " In recording for the business transactions, debits mean an increase and credit means a decrease."

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