Which of the following best describes 'debit'?

The term 'debit' best aligns with the description of an entry that increases either assets or expenses. In accounting, debits are recorded on the left side of a ledger account, and they serve to increase asset accounts, such as cash, inventory, or fixed assets. Additionally, when expenses are incurred — for instance, utility bills or rent payments — they are also recorded as debits.

This understanding is crucial because it forms the foundation of how the double-entry bookkeeping system operates, where every transaction affects at least two accounts. A debit entry reflects an inflow or increase in resources, which is vital for maintaining the balance in accounting equations.

In contrast, the other choices do not accurately encapsulate the nature of debits. Describing an account that records equity changes does not inherently cover the concept of debits, as equity changes can involve both debit and credit entries depending on the transaction. Similarly, an account used specifically for cash transactions does not capture the broader definition of debits, which extend beyond just cash. Lastly, stating that a debit entry has no effect on liabilities is misleading, as debits can also interact with liability accounts, especially when adjusting entries are made, making this option inaccurate.