Which of the following accounts increases with a credit?

• A. Inventory
• B. Prepaid Expenses
• C. Accounts Payable
• D. Cash

Answer: (C)

Verified step by step guidance

1. Understand the nature of accounts: In accounting, accounts are classified into five main categories: Assets, Liabilities, Equity, Revenue, and Expenses. Each type of account has a normal balance side, which determines whether it increases with a debit or a credit.
2. Review the normal balance of each account: Assets (e.g., Inventory, Prepaid Expenses, Cash) typically increase with a debit, while Liabilities (e.g., Accounts Payable) and Equity typically increase with a credit.
3. Analyze the given accounts: Inventory, Prepaid Expenses, and Cash are asset accounts, which increase with a debit. Accounts Payable is a liability account, which increases with a credit.
4. Apply the accounting rule: Since Accounts Payable is a liability account, it follows the rule that liabilities increase with a credit. This is consistent with the normal balance side of liability accounts.
5. Conclude the correct answer: Based on the analysis, the account that increases with a credit is Accounts Payable.