Debit A Liability Account is a business term that refers to the action of increasing a company’s liabilities. When a company debits a liability account, it adds assets to its balance sheet such as short-term or long-term debt liabilities like loans, lines of credit and other forms of financing. The increase in liabilities is used to finance the company’s activities. It helps companies pay operating expenses and purchase necessary items like inventory and equipment. By increasing its liabilities, a company can generate cash and continue to grow without needing to borrow more money.