Which types of accounts are increased by credits?

The correct answer indicates that all types of accounts are affected by credits, but it is important to recognize which specific accounts actually increase with a credit entry. In accounting, credits typically increase liability accounts and equity accounts, while they decrease asset accounts.

Liability accounts, such as loans payable and accounts payable, increase with credits because they represent obligations the company owes to others. Similarly, when it comes to equity accounts, including retained earnings, credits also result in an increase because they signify value held by the owners or shareholders after all liabilities have been accounted for.

On the other hand, asset accounts, which mainly include cash, inventory, and receivables, are decreased by credits. Likewise, expense accounts are reduced by credits since expenses represent the consumption of assets; hence a credit entry, which increases other account types, would not apply in this case.

Therefore, while liability and equity accounts definitely increase with credits, not all accounts, such as assets and expenses, do, which would make option D misleading. The better understanding lies in recognizing the specific accounts that change with credits in relation to accepted accounting principles.