State BPA Fundamental Accounting Practice Exam

What effect does a debit have on an account's balance?

1. Always increases the balance

2. Always decreases the balance

3. Can either increase or decrease

4. No effect

The correct answer is: Always decreases the balance

In accounting, a debit has a specific effect on different types of accounts. The nature of the account determines whether a debit increases or decreases the balance. For asset and expense accounts, a debit increases the balance. When you debit these accounts, it signifies that you are adding value or recognizing expenses, which raises the account's total. For example, if you purchase supplies, you debit an asset account (supplies), which increases its balance. On the other hand, for liability and equity accounts, a debit decreases the balance. When you debit these accounts, you are reducing the amount that the entity owes (in the case of liabilities) or the owner's equity. Thus, a debit can either increase or decrease an account’s balance depending on the type of account being affected. The correct understanding of debits and credits is essential, as it allows for accurate accounting practices and reporting.