A debit increases the balance in all of the following accounts except for which one?
A. Cash
B. Withdrawals
C. Expenses
D. Accounts payable
My answer is D
You are correct! A debit actually increases the balance in all of the accounts listed (Cash, Withdrawals, Expenses, and Accounts payable), except for Accounts payable.
To understand why, we need to understand the basics of debits and credits in accounting. In double-entry accounting, every transaction involves at least two accounts—a debit and a credit.
A debit entry increases the balance in an asset account (like Cash) or an expense account (like Expenses) and decreases the balance in a liability account (like Accounts payable) or equity account.
On the other hand, a credit entry increases the balance in a liability account (like Accounts payable) or equity account and decreases the balance in an asset account (like Cash) or an expense account (like Expenses).
In this case, a debit entry directly increases the balance in Cash (Option A) and Expenses (Option C). It also increases the balance in Withdrawals (Option B), which represents the owner's or shareholder's withdrawals from the business and is considered an expense. However, a debit entry reduces the balance in Accounts payable (Option D), which represents a company's short-term obligations to its suppliers or creditors.
Therefore, the correct answer is D, Accounts payable.