Final answer:
The statement is true as it aligns with the double-entry accounting system, ensuring that for every debit entry there is a corresponding credit entry, and vice versa, thereby maintaining the balance of the general ledger.
Step-by-step explanation:
The statement that the total amount of increases entered in the general ledger must equal the total amount of decreases is true.
This concept is based on the fundamental accounting principle known as the 'double-entry accounting system,' where every financial transaction has equal and opposite effects in at least two different accounts. The T-account is a representation used to illustrate the effect of transactions on the accounts of a firm.
In a T-account, the left side (L) represents debits and the right side (R) represents credits. Assets are increased by debits and decreased by credits, while liabilities and net worth (or equity) are increased by credits and decreased by debits. Accordingly, the T-account of a healthy bank will reflect that assets are equal to the sum of liabilities and net worth, thus ensuring that the halves of the T-account balance out.
In the context of a general ledger, this ensures that the total increases (debits for assets or credits for liabilities/equity), do, in fact, equal the total decreases (credits for assets or debits for liabilities/equity), keeping the overall accounting equation balanced. The accounting equation, which specifies that assets equal liabilities plus equity, underpins this principle and is critical for an accurate reflection of the firm's financial position.