Question

Will an accounts receivable balance increase with a debit or a credit entry? How do you know?

a) Debit; Because accounts receivable represent an asset, and debits increase assets.
b) Credit; Because accounts receivable represent a liability, and credits increase liabilities.
c) Debit; Because accounts receivable represent a liability, and debits increase liabilities.
d) Credit; Because accounts receivable represent an asset, and credits increase assets.

Answer 1

An accounts receivable balance increases with a debit entry, as this type of account is considered an asset and debits are used to increase assets within the double-entry accounting system.

Step-by-step explanation:

An accounts receivable balance will increase with a debit entry because accounts receivable represent an asset, and in accounting, debits increase assets. This is grounded in the fundamental principle of double-entry bookkeeping where assets are on the left side (debit side) of a T-account and the liabilities and equity are on the right side (credit side). Any time a company sells goods or services on credit, it creates an accounts receivable, which means the customer owes the company money. Recording this transaction requires a debit to increase the accounts receivable balance, reflecting the expectation of future cash receipt.

Hence, the correct answer to the student's question is a) Debit; Because accounts receivable represent an asset, and debits increase assets.