Question

Which of the following statements about the rules of debit and credit is true?

(A) Decrease Prepaid Insurance with a credit and the normal balance is a credit.
(B) Increase Accounts Payable with a credit and the normal balance is a debit.
(C) Increase Supplies with a credit and the normal balance is a credit.
(D) Decrease Cash with a debit and the normal balance is a credit.
(E) Increase Supplies Expense with a debit and the normal balance is a debit.

Answer 1

The correct statement about the rules of debit and credit is (E) Increase Supplies Expense with a debit and the normal balance is a debit since expenses are increased with debits and have a normal debit balance.

Step-by-step explanation:

The rules of debit and credit are fundamental concepts in accounting that determine how transactions are recorded. In the context of the given options, (A) through (D) contain incorrect statements about the rules of debit and credit or the normal balances of accounts. For example, Prepaid Insurance is decreased with a debit, not a credit, and its normal balance is a debit, not a credit, which makes statement (A) incorrect. The correct statement is (E), Increase Supplies Expense with a debit and the normal balance is a debit. This is because expenses are increased with debits and typically have a normal debit balance on the ledger.