Which of the following does not correctly describe an adjusting journal entry that debits interest expense and credits interest payable?
A)The entry increases expenses and decreases retained earnings.
B)The entry decreases net income and decreases stockholders' equity.
C)The entry increases expenses and increases liabilities.
D)The entry decreases assets and decreases stockholders' equity.

Question

Quizplus · Accepted Answer

Adjusting journal entries for accruing interest involve increasing an expense (interest expense) and increasing a liability (interest payable), which decreases net income and, consequently, retained earnings (part of stockholders' equity). However, they do not directly decrease assets, making option D incorrect.

Which of the Following Does Not Correctly Describe an Adjusting