Define 'debit' in accounting.

In accounting, 'debit' refers to an entry that increases assets or expenses and decreases liabilities or equity. This definition is rooted in the double-entry accounting system, which relies on a matching of debits and credits to maintain balance in the accounting equation: Assets = Liabilities + Equity.

When a company makes a debit entry, it may be for several reasons. For instance, if a business purchases equipment, it will debit the Equipment account, thereby increasing its assets. Similarly, if a company incurs an expense, like rent or utilities, that expense will be debited, reflecting an increase in expenses. Each of these scenarios showcases how debits are instrumental in depicting the financial health and activities of a business.

Understanding this concept is crucial because it helps in properly recording transactions to ensure that the accounting records accurately reflect the company’s financial position. The alternative options do not encapsulate the true nature of debits. Some may incorrectly suggest that debits only apply to cash transactions or focus on specific types of entries that do not fully represent the broader function and application of debits in accounting. Thus, the correct option not only aligns with the fundamental principles of accounting but also illustrates the versatile role that debits play in financial reporting.