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

Question

Quizplus · Accepted Answer

A debit to supplies expense and a credit to supplies represents the use of supplies, which is an expense. Therefore, it increases expenses and decreases assets. Option B is also correct as the decrease in net income (due to the increase in expenses) decreases assets. Option D is incorrect because the decrease in net income would decrease retained earnings, not stockholders' equity. However, option C is incorrect because an increase in expenses would decrease retained earnings, not increase them.

Which of the Following Does Not Correctly Describe an Adjusting