Which account type is increased by credits and decreased by debits?

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Study for the ACFE Accounting Terms Test with interactive quizzes. Prepare with multiple choice questions, each question accompanied by explanations and hints. Ensure your success with our study materials!

Multiple Choice

Which account type is increased by credits and decreased by debits?

Explanation:
With double-entry accounting, each account type has a normal balance, and credits or debits move that balance in specific directions. Liabilities have a normal credit balance, so applying a credit increases the liability and applying a debit decreases it. Think of it as taking on more obligation when you credit the liability, and reducing that obligation when you debit it. For example, when a company borrows money, the liability is credited; when it pays down the loan, the liability is debited. This pattern—credit increases, debit decreases—is what makes this account type the one that fits the description.

With double-entry accounting, each account type has a normal balance, and credits or debits move that balance in specific directions. Liabilities have a normal credit balance, so applying a credit increases the liability and applying a debit decreases it. Think of it as taking on more obligation when you credit the liability, and reducing that obligation when you debit it. For example, when a company borrows money, the liability is credited; when it pays down the loan, the liability is debited. This pattern—credit increases, debit decreases—is what makes this account type the one that fits the description.

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