Why Are Expenses Increased with a Debit

question 13

Multiple Choice

Why are expenses increased with a debit?

• A)They are always paid by cash, which is credited.Thus expenses are debited.
• B)They decrease stockholders' equity thus they are increased with a debit.
• C)They have the same rules of debits and credits as the retained earnings account.
• D)None of the statements are correct.

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Definitions:

Net Cash Flow

The amount of cash generated or spent over a specific period, typically the result of operating, investing, and financing activities.

Present Value

The value today of a future payment, or series of future payments, discounted at some appropriate interest rate.

Earnings Rate

The rate at which an investment or savings account generates income, usually expressed as a percentage of the principal.

Compound Interest

Interest calculated on the initial principal, including all of the accumulated interest from previous periods on a deposit or loan.