Question

In a journal entry to decrease a company's balance, which accounts are likely to be involved?

A. Assets and Liabilities
B. Revenue and Expenses
C. Equity and Liabilities
D. Assets and Revenue

Answer 1

To decrease a company's balance on the T-account, journal entries may involve the assets and liabilities accounts, or the assets and revenue accounts, which include recording transactions like paying off debts or accounting for expenses.

Step-by-step explanation:

To decrease a company's balance on its T-account, you need to either decrease assets or increase liabilities or equity. When making a journal entry, if you are reducing the company's balance, you might be involved with recording transactions in assets and liabilities, such as paying off a debt, which decreases cash (an asset) and decreases a payable (a liability).

Alternatively, the accounts involved could be assets and revenue, for instance, when accounting for an expense that reduces cash (an asset) and increases expenses while decreasing revenue. Likewise, reducing equity, such as through dividends or drawing accounts, also impacts the balances. The T-account helps to visualize and ensure that the overall equation, assets equals liabilities plus net worth, stays balanced.