What do you mean by credit?

An increase in asset

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An increase in liability

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A decrease in liability

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A decrease in proprietor's equity

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Solution

The correct option is B An increase in liability
The accounting equation means assets equals liabilities plus equity. It is the base of double entry system of accounting. Liabilities and incomes both are having credit balance. Equity is a permanent account in the business and incomes are a temporary sub account of equity.
Hence, credit will increase liabilities.

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Similar questions

Give an example for each of the following types of transaction.
(i) Increase in one asset, decrease in another asset.
(ii) Increase in asset, increase in liability.
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
(v) Decrease in asset, decrease in owner's capital.
(vi) Decrease in liabilities, increase in owner's capital.
(vii) Increase in one liability, decrease in another liability.
(viii) Increase in liabilities, decrease in owner's capital.

Q. Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.

Q. Which of the following transactions results in increase in shareholders' equity and decrease in liabilities?

Which receipts of government budget are referred to when there is neither the increase in liability nor the decrease in assets?

If liabilities increase by 3,000 and equity increases by 2,000, what is the effect on assets?

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