In a journal entry, what is the effect of recording a credit to a liability account?

• A. It decreases the liability account balance.
• B. It increases the asset account balance.
• C. It increases the liability account balance.
• D. It decreases the equity account balance.

Answer: (C)

Verified step by step guidance

1. Understand the basic accounting equation: \(\text{Assets} = \text{Liabilities} + \text{Equity}\). This equation must always remain balanced.
2. Recall that liabilities are accounts that represent what the company owes to others, and they normally have a credit balance.
3. In double-entry accounting, a credit to a liability account increases its balance, while a debit decreases it.
4. Therefore, recording a credit to a liability account means you are increasing the amount the company owes, which increases the liability balance.
5. This action does not directly affect asset or equity accounts; it specifically increases the liability side of the accounting equation.