An accountant has debited an asset account for $1,000 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?
A) Credit an asset account for $500.
B) Credit another liability account for $500.
C) Credit an equity account for $500.
D) Debit an equity account for $500.

Question

Quizplus · Accepted Answer

Since the accountant has initially debited an asset account, the transaction indicates an increase in assets. If the liability account has been credited, it indicates a decrease in liabilities. Therefore, to complete the recording of the transaction, an equity account or another liability account could be credited for $500, or an asset account could be credited for $500 to complete the transaction. However, debiting an equity account for $500 would be incorrect as it would decrease the equity balance, which does not reflect the actual transaction.

An Accountant Has Debited an Asset Account for $1,000 and Credited