Question

the term debit means increase and credit means decrease. True or false? Explain your answer.

Explain in 100-150 words

Answer 1

Well it depends on the nature (or type) of account you are actually debiting or crediting and the normal balance of those accounts.

• An account by its nature can be classified into an asset account, a liability account, an expense (or loss) account or an income (or gain) account.
• The normal balances of the above type of accounts are as follows

Nature of account	Examples	Normal balance
Asset account	Cash, fixed asset like equipment etc.	Debit balance
Liability account	Accounts payable, Salary payable etc.	Credit balance
Expense or Loss account	Cost of sales, salaries, selling expenses etc.	Debit balance
Income or Gain account	Sales revenue, Service revenue etc.	Credit balance

• When an asset account is debited, it' balance increases. And when an asset account is credited, its balance decreases.
• When an expense account is debited, its balance increases. And when an expense account is credited, its balance decreases.
• When a liability account is debited, its balance decreases. And when a liability account is credited, its balance increases.
• When an income account is debited, its balance decreases. And when an income account is credited, its balance increases.

Conclusion

the term debit means increase and credit means decrease:-

• It is true, if we are talking about debiting an asset account or an expense account.
• It is false, if we are talking about debiting a liability account or an income account.

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