Question

A credit entry:

A. increases asset and expense accounts and decreases liability, common stock, and revenue accounts.
B. is always a decrease in an account.
C. decreases asset and expense accounts and increases liability, common stock, and revenue accounts.
D. is recorded on the left side of a T-account.
E. is always an increase in an account.

Answer 1

A credit entry decreases asset and expense accounts while increasing liability, common stock, and revenue accounts, which is option C.

Step-by-step explanation:

A credit entry is correctly described in option C: it decreases asset and expense accounts and increases liability, common stock, and revenue accounts. In accounting, the conventions of a T-account dictate that credits are recorded on the right side. This resonates with the structure of a bank's T-account, where liabilities and net worth are on the right side as well, balancing out the assets on the left side. The concept of a “T-account” helps visualize the fundamental accounting equation where assets equal liabilities plus net worth.