Question

If the previous account balance and the current entry posted to an account are both debits, the new account balance is a debit.

True or false

Answer 1

The statement is true; when an account has a previous debit balance and a current entry also posts as a debit, the new balance is a debit. Debits increase asset or expense accounts and decrease liability or equity accounts, thus adding together for the new balance.

Step-by-step explanation:

The statement is true. In accounting, a debit entry increases the balance of an asset or expense account, or decreases a liability or equity account. If the previous balance on an account is a debit and the current entry posted is also a debit, the new balance will indeed be a debit.

Essentially, debit entries on the same side of an account will add together, while a debit and a credit entry would offset each other to some degree, depending on their values.

For example, if an account has a previous debit balance of $500, and a new entry posts a debit of $300 to that account, the new balance will be a debit of $800.

This concept is crucial for maintaining accurate financial records and ensuring that account balances reflect the true state of the finances, whether you're managing personal finance, using a debit card, or handling a business's accounts.