If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account,which of the following describes the effect of the credit portion of the entry?
A) decreases the balance of an stockholders' equity account
B) increases the balance of a liability account
C) increases the balance of an asset account
D) decreases the balance of an expense account

Question

Quizplus · Accepted Answer

The credit portion of the adjusting entry must be to increase the balance of a liability account that offsets the increase in the expense account. This is because an adjustment is usually made for an expense that has been incurred but not yet paid, resulting in an increase in the liability account and a corresponding increase in the expense account. Therefore, option B is correct as it describes the effect of the credit portion of the entry on a liability account.

If the Effect of the Debit Portion of an Adjusting