If the effect of the credit portion of an adjusting entry is to increase the balance of a revenue account, which of the following describes the effect of the debit portion of the entry?
A) increases the balance of a contra revenue account
B) decreases the balance of an asset account
C) increases the balance of a stockholders' equity account
D) decreases the balance of a liability account

Question

Quizplus · Accepted Answer

If the credit portion of an adjusting entry is increasing the balance of a revenue account, then the debit portion must be decreasing the balance of a different account. Since revenue increases on the credit side of an entry, it is important to have a corresponding decrease on the debit side, and usually, this comes in the form of a decrease in a liability account. Therefore, the best choice is D, which describes the effect of the debit portion as decreasing the balance of a liability account.

If the Effect of the Credit Portion of an Adjusting