How will the following adjusting journal entry affect the accounting equation?
A) increase assets, increase revenues
B) increase liabilities, increase revenues
C) decrease liabilities, increase revenues
D) decrease liabilities, decrease revenues

Question

How will the following adjusting journal entry affect the accounting equation? 
A) increase assets, increase revenues 
B) increase liabilities, increase revenues 
C) decrease liabilities, increase revenues 
D) decrease liabilities, decrease revenues

Quizplus · Accepted Answer

This adjusting journal entry could be adjusting a previously recorded liability, meaning that the liability will decrease. At the same time, it increases revenues, which will increase the equity section of the accounting equation. This results in a decrease in liabilities and an increase in equity, leaving assets unchanged. Therefore, the correct option is C, decrease liabilities, increase revenues.

How Will the Following Adjusting Journal Entry Affect the Accounting