Multiple Choice
In the context of journal entries, when a principal compensates an agent for services performed on the principal's behalf, which of the following is the correct journal entry for the principal?
2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
A debit is used to decrease which of the following types of accounts?
A
Liability accounts
B
Dividend accounts
C
Asset accounts
D
Expense accounts
Verified step by step guidance1
Understand the concept of a debit: In accounting, a debit is an entry that increases asset or expense accounts and decreases liability, equity, or revenue accounts.
Review the types of accounts listed in the problem: Liability accounts, Dividend accounts, Asset accounts, and Expense accounts.
Recall the effect of debits on each type of account: Debits decrease liability accounts, increase dividend accounts, increase asset accounts, and increase expense accounts.
Focus on the question: The problem specifically asks which type of account is decreased by a debit. Based on the explanation above, liability accounts are decreased by a debit.
Conclude the reasoning: The correct answer is 'Liability accounts' because debits reduce the balance of liabilities, while they increase the balance of the other account types listed.
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