Which of the following statements is true?
A) Debits increase assets and increase liabilities.
B) Credits decrease assets and decrease liabilities.
C) Credits decrease assets and increase liabilities.
D) Debits decrease liabilities and decrease assets.

Question

Quizplus · Accepted Answer

The accounting equation states that assets = liabilities + equity. When a transaction is recorded in accounting, it must be recorded with a debit and a credit that balance each other out. Debits increase assets and decrease liabilities, while credits decrease assets and increase liabilities. Therefore, C is the only statement that correctly reflects the effect of credits on assets and liabilities.

Which of the Following Statements Is True