PRC-1 · Chapter 1 · Question 76 of 100
'Omega Corp' records a transaction that debits a consulting expense for Rs. 100,000 and credits accounts payable for Rs. 100,000. What is the impact on the financial elements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Increase in a liability, decrease in owner's equity.
Explanation
Crediting accounts payable increases the liability. Debiting an expense ultimately reduces net profit, which consequently decreases the owner's equity.
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