In double-entry accounting, what does a credit to a liability account indicate?

• A. An increase in total assets
• B. A decrease in the liability balance
• C. An increase in an expense account
• D. An increase in the liability balance

Answer: (D)

Verified step by step guidance

1. Understand the basic principle of double-entry accounting: every transaction affects at least two accounts, with debits equaling credits.
2. Recall that liability accounts normally have a credit balance, meaning credits increase liabilities and debits decrease them.
3. Recognize that a credit to a liability account means the company is either incurring more obligations or increasing what it owes, thus increasing the liability balance.
4. Contrast this with asset accounts, which normally have debit balances, so credits to assets decrease their balance, not increase them.
5. Also note that expense accounts normally have debit balances, so credits to expense accounts would decrease expenses, not increase them.