Final answer:
Debit entries in double-entry bookkeeping increase expenses or decrease liabilities, which aligns with the fundamental accounting equation. T-accounts help illustrate the dual effect of transactions, maintaining the balance of a firm's financial statements, including banks, where loans are assets and deposits are liabilities.
Step-by-step explanation:
In double-entry bookkeeping, the correct statement about entries is Debit entries either increase expenses or decrease liabilities. This principle is a fundamental aspect of accounting, which ensures that every transaction is recorded in two different accounts — one debit and one credit — to keep the accounting equation Assets = Liabilities + Equity balanced. The T-account helps visualize this concept, where each transaction affects two accounts, keeping the overall balance sheet of a bank, or any other business, consistent.
For example, when banks provide loans, these loans count as assets because they represent money the bank will receive back. Conversely, deposits made by customers are viewed as liabilities because the bank owes this money back to the depositors. The total assets of a bank, including loans and securities, minus its total liabilities, including deposits and other obligations, result in the bank's net worth or equity. To clarify the statements provided in the question: Debit entries do not directly increase income; they increase expenses or assets and decrease liabilities or equity. On the other hand, credit entries may increase income or liabilities, or equity, and decrease assets or expenses.