“All debits are increases and all credits are decreases.” Is

“All debits are increases and all credits are decreases.” Is this a correct statement? Explain your answer.

What will be an ideal response

ANSWER

This is not a correct statement. The double entry-system of accounting is a system of accounting in which every transaction affects at least two accounts. As transactions are analyzed and recorded, the rules of debits and credits keep the accounting equation in balance. Assets, expenses and dividends are increased with a debit and decreased with a credit. Liabilities, revenues, and common stock are increased with a credit and decreased with a debit.