Commerce Exam > Commerce Questions > DEBIT signifies:a)Increase in Assets accountb...
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DEBIT signifies:
- a)Increase in Assets account
- b)Decrease in Liability account
- c)Decrease in Capital account
- d)All of the above
Correct answer is 'D'. Can you explain this answer?
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DEBIT signifies:a)Increase in Assets accountb)Decrease in Liability ac...
In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner's draws. A debit can also signify a decrease in a liability, revenues, and owner's equity.
A debit is one-half of bookkeeping's double-entry system. The other half is a credit.
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DEBIT signifies:a)Increase in Assets accountb)Decrease in Liability ac...
Debit is an accounting entry that represents an increase in assets, decrease in liabilities, or decrease in capital. Let's understand each of these in detail:
Increase in Assets account:
- An asset is anything that the company owns and has value. Examples include cash, accounts receivable, inventory, property, and equipment.
- When an asset account is debited, it means that there has been an increase in the value of that asset.
- For example, if a company purchases inventory worth $1,000 on credit, the accounting entry would be:
- Debit Inventory account: $1,000 (increased asset)
- Credit Accounts Payable account: $1,000 (increased liability)
Decrease in Liability account:
- A liability is an obligation that the company owes to someone else. Examples include accounts payable, loans, and taxes payable.
- When a liability account is debited, it means that there has been a decrease in the value of that liability.
- For example, if a company makes a payment of $500 towards its accounts payable, the accounting entry would be:
- Debit Accounts Payable account: $500 (decreased liability)
- Credit Cash account: $500 (decreased asset)
Decrease in Capital account:
- Capital is the amount of money that the owner has invested in the company. It can also include profits that have been retained in the business.
- When a capital account is debited, it means that there has been a decrease in the value of the owner's investment or retained earnings.
- For example, if the owner withdraws $1,000 from the business for personal use, the accounting entry would be:
- Debit Owner's Withdrawals account: $1,000 (decreased capital)
- Credit Cash account: $1,000 (decreased asset)
Therefore, debit can signify an increase in assets, decrease in liabilities, or decrease in capital, hence the correct answer is 'D' - all of the above.
Increase in Assets account:
- An asset is anything that the company owns and has value. Examples include cash, accounts receivable, inventory, property, and equipment.
- When an asset account is debited, it means that there has been an increase in the value of that asset.
- For example, if a company purchases inventory worth $1,000 on credit, the accounting entry would be:
- Debit Inventory account: $1,000 (increased asset)
- Credit Accounts Payable account: $1,000 (increased liability)
Decrease in Liability account:
- A liability is an obligation that the company owes to someone else. Examples include accounts payable, loans, and taxes payable.
- When a liability account is debited, it means that there has been a decrease in the value of that liability.
- For example, if a company makes a payment of $500 towards its accounts payable, the accounting entry would be:
- Debit Accounts Payable account: $500 (decreased liability)
- Credit Cash account: $500 (decreased asset)
Decrease in Capital account:
- Capital is the amount of money that the owner has invested in the company. It can also include profits that have been retained in the business.
- When a capital account is debited, it means that there has been a decrease in the value of the owner's investment or retained earnings.
- For example, if the owner withdraws $1,000 from the business for personal use, the accounting entry would be:
- Debit Owner's Withdrawals account: $1,000 (decreased capital)
- Credit Cash account: $1,000 (decreased asset)
Therefore, debit can signify an increase in assets, decrease in liabilities, or decrease in capital, hence the correct answer is 'D' - all of the above.
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DEBIT signifies:a)Increase in Assets accountb)Decrease in Liability ac...
It is easy i can solve your problem
debit signifies the 1 option is increase in assets a count is correct means assets is a real account which means "debit what comes in ". 2option is decrease in liability is also correct means liability is a profit for the business and its shown on debit side. and 3 option is decrease in capital means profit of the business
so,the answer is d
debit signifies the 1 option is increase in assets a count is correct means assets is a real account which means "debit what comes in ". 2option is decrease in liability is also correct means liability is a profit for the business and its shown on debit side. and 3 option is decrease in capital means profit of the business
so,the answer is d
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