State BPA Fundamental Accounting Practice Exam

True or False: A debit can represent an increase or decrease to an account's balance.

1. True

2. False

3. Only increase

4. Only decrease

The correct answer is: True

A debit can indeed represent both an increase or a decrease to an account's balance, depending on the nature of the account in question. In accounting, the fundamental principle is based on the type of account affected. For example, in asset and expense accounts, a debit typically increases the balance. Conversely, in liability, revenue, and equity accounts, a debit represents a decrease. This dual nature of debits is essential to understanding the double-entry accounting system, where every transaction involves both a debit and a corresponding credit. By recognizing that a debit can either increase or decrease an account's balance, one grasps a critical aspect of how transactions impact financial statements. This understanding is foundational to performing accurate accounting entries and maintaining the integrity of financial records.