Which of the following does not correctly describe the following adjusting journal entry?
A)Total assets increase.
B)The transaction is an example of an accrual.
C)Stockholders' equity decreases.
D)Net income increases.

Question

Which of the following does not correctly describe the following adjusting journal entry? 
A)Total assets increase. 
B)The transaction is an example of an accrual. 
C)Stockholders' equity decreases. 
D)Net income increases.

Quizplus · Accepted Answer

The adjusting entry reduces the balance of an expense account and increases the balance of a liability account. This means that stockholders' equity decreases because expenses increase, but it does not mean that stockholders' equity is directly affected by the adjusting entry. Therefore, choice C does not correctly describe the adjusting entry.

Which of the Following Does Not Correctly Describe the Following