Question

Debits:

	a.	Decrease both assets and liabilities.
	b.	Increase assets and decrease liabilities.
	c.	Decrease assets and increase liabilities.
	d.	Increase both assets and liabilities.

Answer 1

As we know the accounting equation, which is :

Assests = Liabilities + Owner's Equity

And we also know, Whenever a transaction takes place, there takes place a debit and a credit, and so the amount remains balanced.

Let's see all the options and analyze which one is correct by an example :

Suppose there is a transaction taking place. A furniture is bought for Rs 1000. Here furniture account is debited and cash account is credited.

Suppose one more example, when you pay a bill pending, the accounts payable is debited.

a) this option is wrong as it says debit decreases both assets and liabilities. But we can clearly see in the example that furniture account is debited and hence furniture that is an assets, it increases. So it is wrong to say that debit decreases assets

b) option b is correct as seen from both examples it is clear that debit increases assets and decrease liabilities. As furniture is increased that is an asset in example first. In example second. Accounts payable is liability, which gets decreased when debit occurs.

C) option c is wrong as it states decrease in assets when there occurs a debit which is norlt correct as assets increase when debit occurs.

D) same with option d, it is also wrong as it states both liabilities and assets increases.

So, only option b is correct.