Which of the following accounts is decreased by a debit entry?
Answer
a. Accounts Payable
b. Cash
c. Prepaid Insurance
d. Insurance Expense
To determine which account is decreased by a debit entry, let's understand the basic rules of debits and credits in accounting.
In accounting, debits and credits are used to record financial transactions. They are entered in specific accounts in a general ledger to maintain accurate records.
Debits and credits affect different types of accounts in opposite ways. Here are the general rules:
1. Assets: Debit entries increase assets, while credit entries decrease assets.
2. Liabilities: Debit entries decrease liabilities, while credit entries increase liabilities.
3. Stockholders' Equity: Debit entries decrease equity, while credit entries increase equity.
4. Revenue: Debit entries decrease revenue, while credit entries increase revenue.
5. Expenses: Debit entries increase expenses, while credit entries decrease expenses.
Now, let's apply these rules to the given options:
a. Accounts Payable:
Accounts Payable is a liability account. To decrease a liability account, we need to enter a debit entry. Therefore, a debit entry would decrease Accounts Payable.
b. Cash:
Cash is an asset account. As per the rules, a debit entry increases assets. Hence, a debit entry would increase Cash, not decrease it.
c. Prepaid Insurance:
Prepaid Insurance is an asset account. Following the rules, a debit entry would increase assets, not decrease them.
d. Insurance Expense:
Insurance Expense is an expense account. According to the rules, a debit entry would increase expenses, not decrease them.
Answer: The account that is decreased by a debit entry is (a) Accounts Payable.