Question

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 owner's equity account
b. increases the balance of an liability account
c. increases the balance of an asset account
d. decreases the balance of an expense account

Answer 1

Answer:

b. increases the balance of an liability account

Explanation:

Every transaction in the accounting must satisfy the balance of of Accounting Equation. The transaction which behave abnormally is always a wrong transaction. A debit portion in adjusting entry is to increase the balance of expense account. On the other hand credit entry should settle to make the accounting equation balance and show the correct effect of the transaction on both accounts.

The balance of owner's equity account is credit through credit entry it will be increased. By observing the nature of assets account asset account the credit entry in asset account will decrease the account balance. Due to debit nature of Expense account the credit to expense account will decrease its balance, but its abnormal that in the same transaction the expense is increasing and decreasing as well. So due to the nature of Liability account a credit entry in it will increase its balance and this is the appropriate answer.