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If the effect of the cr portion of an adjusting entry is to increase a liability account then what will the effect of the Dr portion of the entry be?

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Question added by Ahmed Abdi Mahad , Director of Internal Auditing Directorate , Jigjiga University
Date Posted: 2015/04/24
Muhammad Azhar Zahid
by Muhammad Azhar Zahid , ERP Consultant , Supersoft Database Developers

it may have 3 possible impacts on debit side

  • may increase an expense
  • may increase capital expense ultimately increasing Assets
  • may reduce the value of some other liabilities like Account Payable / Share Capital / Accruals etc

 

Sample Entry

 

Salary exp   500 

   Salary Payable  500

 

or

 

Plant & Machinery a/c    10000

   Director Loan a/c                10000

 

or 

 

Supplier a/c      2000

    Bank ( Limit ) a/c   2000

 

it may happen in a composit entry too

 

Regards;   Azhar

Saidul Alam
by Saidul Alam , Accountant , Akhtar Al Balushi Trad. & Cont. L.L.C

Reducing liabilities or increasing Assets/ Expenses.