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Which of the following applications of 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. decrease Cash with a debit and the normal balance is a credit
d. increase Equipment with a debit and the normal balance is a debit

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Answer:

d. increase Equipment with a debit and the normal balance is a debit

Explanation:

Equipment is an asset account. Asset accounts are increased with a debit, and decreased with a credit. Their normal balance is a debit because assets as a whole are debit accounts.

For example, if a firm has $1,000 worth of equipment, and purchases (with cash) $200 more, the journal entry would be:

Account           Debit      Credit

Equipment      $200

Cash                               $200

And the new normal balance would be a debit worth of $1,200

   

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