Increase or Decrease Assets, Expenses, and Liabilities | CFE Exam Answer
Question
________ increase assets and expenses and/or decrease liabilities and/or equity
Answers
Explanations
Click on the arrows to vote for the correct answer
A. B. C. D.B
The correct answer is A. Journal Entries.
Journal entries are accounting transactions that record the financial effects of business events. Journal entries consist of at least two accounts with equal and opposite debit and credit amounts. Debits increase assets and expenses, and decrease liabilities and equity, while credits do the opposite.
An increase in assets occurs when a company acquires or improves assets such as cash, accounts receivable, inventory, or property, plant, and equipment. An increase in expenses occurs when a company incurs costs related to operating its business, such as salaries, rent, utilities, or supplies.
On the other hand, a decrease in liabilities occurs when a company pays off debts or obligations to its creditors, while a decrease in equity occurs when a company distributes profits to its shareholders or incurs losses.
Therefore, journal entries are used to increase assets and expenses, and/or decrease liabilities and/or equity by recording the appropriate debit and credit amounts in the affected accounts. As a result, journal entries are a critical tool for recording financial transactions and maintaining accurate financial records.
