Question

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

Answer 1

Answer:

The entry decreases assets and decreases stockholders' equity. T

Explanation:

The adjusting entry of interest expense would impact the expenses account, automatically the income statement also.  

Moreover, it also impacts the stockholder equity but it does not impact the asset account. Rest item which is mentioned in the question except the corrected option would be affected.  

Interest expense is an expense that decreases the net income of the business organization and at the same time it shows the interest payable on the liabilities side.