What accounting action increases the assets of a firm?

What accounting action increases the assets of a firm?

• A. Credit
• B. Loan
• C. Debit
• D. Dividend

Answer: (C)

The choice indicating that a debit increases the assets of a firm is correct because, in accounting, debits and credits are fundamental to the double-entry bookkeeping system. A debit entry in an asset account signifies an increase in that account's balance. For instance, if a company purchases inventory or equipment, the asset accounts reflect these additions through debit entries. In contrast, credits typically represent increases in liabilities or equity, thereby not contributing to asset growth. Loans may result in increased liabilities rather than direct asset increases unless the loan proceeds are used to acquire assets. Dividends, on the other hand, are distributions of earnings to shareholders and ultimately reduce retained earnings, reflecting a decrease rather than an increase in assets.

The choice indicating that a debit increases the assets of a firm is correct because, in accounting, debits and credits are fundamental to the double-entry bookkeeping system. A debit entry in an asset account signifies an increase in that account's balance. For instance, if a company purchases inventory or equipment, the asset accounts reflect these additions through debit entries.

In contrast, credits typically represent increases in liabilities or equity, thereby not contributing to asset growth. Loans may result in increased liabilities rather than direct asset increases unless the loan proceeds are used to acquire assets. Dividends, on the other hand, are distributions of earnings to shareholders and ultimately reduce retained earnings, reflecting a decrease rather than an increase in assets.