Question

Which is the result of entering a debit in an expense account?

A. an increase in Retained Earnings
B. a reduction in Cash
C. an increase in Total Assets
D. a reduction in Retained Earnings

Answer 1

A debit in an expense account results in a reduction in Retained Earnings, as it decreases net income which then lowers the Retained Earnings in the equity section of the balance sheet. The correct option is A.

Step-by-step explanation:

Entering a debit in an expense account results in a reduction in Retained Earnings. This is because expenses reduce the net income for the period, and net income (or loss) is closed out to the Retained Earnings account at the end of the accounting period.

Consequently, when an expense increases due to a debit entry, it ultimately reduces the Retained Earnings as the net income decreases. It should be noted that this entry does not directly affect Cash or Total Assets, though paying expenses often involves reducing Cash.

The correct answer for which result occurs from entering a debit in an expense account is D. a reduction in Retained Earnings. The correct option is A.