State BPA Fundamental Accounting Practice Exam

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

1. It reduces the balance

2. It has no effect

3. It increases the balance

4. It resets the balance to zero

The correct answer is: It increases the balance

In accounting, expenses are typically recorded in expense accounts, which operate under the rules of double-entry bookkeeping. When a debit entry is made in an expense account, it increases the balance of that account. This is consistent with the fundamental accounting principle that states expenses are recorded as debits. Debiting an expense account reflects that the entity has incurred additional expenses, which ultimately reduces net income on the income statement. Therefore, as expenses increase, it is shown as an increase in the debit balance of the expense account. This understanding is crucial for accurately preparing financial statements and understanding how different transactions affect a company's financial position.