A transaction has been recorded in the journal of Davis Company as follows:
$$\begin{array} { | l | r | r | }
\hline \text { Interest Expense } & \mathbf { 8 0 0 } & \
\hline \text { Interest Payable } & & \mathbf { 8 0 0 } \
\hline
\end{array}$$
Which of the following describes the effect of this transaction on the company's financial statements?

Question

A transaction has been recorded in the journal of Davis Company as follows:
$$\begin{array} { | l | r | r | } 
\hline \text { Interest Expense } & \mathbf { 8 0 0 } & \
\hline \text { Interest Payable } & & \mathbf { 8 0 0 } \
\hline
\end{array}$$
Which of the following describes the effect of this transaction on the company's financial statements?

Quizplus · Accepted Answer

This transaction increases liabilities because it records an interest expense that is payable, thus increasing the Interest Payable account.

A Transaction Has Been Recorded in the Journal of Davis