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 a liability account
C) increases the balance of an asset account
D) decreases the balance of an expense account

Question

Quizplus · Accepted Answer

When the debit portion of an adjusting entry increases the balance of an expense account, the credit portion will increase the balance of a liability account (e.g. accrued expenses payable or deferred revenue). This is because expenses are typically recognized before they are paid, which creates a liability for the business. The credit portion of the adjusting entry will increase this liability account to reflect the expense that has been incurred but not yet paid.

If the Effect of the Debit Portion of an Adjusting