If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?

Question

BlackTom AI · Accepted Answer

Debits increase expenses and assets, while credits increase liabilities and owners’ equity (and revenues). That core rule of double-entry accounting lets us determine the effect of the debit portion when the credit portion increases a liability.

Relevant concepts:
- Normal balances: assets and expenses normally have debit balances; liabilities, revenues, and owners’ equity normally have credit balances.
- An adjusting entry that credits a liability is typically an accrual (e.g., accrued wages, accrued interest) where an expense has been incurred but not yet paid.
- Every journal entry must balance: total debits = total credits.

Step-by-step reasoning with an example:
1. Suppose a company incurs $1,000 of wages at the end of the period that will be paid next period. The adjusting entry to record this accrual is:
   - Debit Wage Expense $1,000
   - Credit Wages Payable (liability) $1,000
2. Debit Wage Expense increases the expense account by $1,000 (expenses have normal debit balances).
3. The credit increases the liability account by $1,000 (liabilities have normal credit balances).
4. Recognizing the expense also reduces net income and, through closing, reduces owners’ equity — but the immediate debit effect is an increase in an expense account.

Why the correct answer is correct:
- The debit side of an accrual-type adjusting entry increases an expense account because the company is recognizing an incurred cost that has not yet been paid. This matches the rule that debits increase expense accounts.

Why the other options are incorrect:
- “Increases the balance of a contra asset account”: contra asset accounts (e.g., allowance for doubtful accounts) normally have credit balances; a debit would decrease, not increase, a contra asset.
- “Increases the balance of an asset account”: while debits do increase assets, an adjusting entry that credits a liability is ordinarily recording an accrued expense (debit = expense), not acquiring an asset on account. Acquiring an asset on credit is a regular (non-adjusting) transaction.
- “Decreases the balance of an owner's equity account”: increasing an expense ultimately reduces owners’ equity, but the immediate and correct description of the debit effect is that it increases an expense account, not directly “decreasing owners’ equity.”

Conclusion: The debit portion increases the balance of an expense account, which matches the provided correct answer.

If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry? 单项选择题

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