CA Foundation · Accounting · Accounting Process
Under the modern (accounting equation) approach to the rules of debit and credit, which of the following is correct?
An increase in an asset is debited. Under the accounting equation approach, assets and expenses increase on the debit side, while liabilities, capital and incomes increase on the credit side. A decrease in an asset is therefore credited, not debited.
- AIncrease in a liability is debited
- BIncrease in an asset is debitedCorrect
- CDecrease in an asset is debited
- DIncrease in capital is debited
Explanation
Assets and expenses increase by debit. Liabilities, capital and income increase by credit. So an increase in an asset is debited, while an increase in a liability or capital is credited and a decrease in an asset is credited.
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