Which of the following does not correctly describe an adjusting journal entry that debits interest expense and credits interest payable?

A) The entry increases expenses and decreases retained earnings.
B) The entry decreases net income and decreases stockholders' equity.
C) The entry increases expenses and increases liabilities.
D) The entry decreases assets and decreases stockholders' equity.

Interest Expense

The cost incurred by an entity for borrowed funds, which may include the cost of bonds, loans, convertible debt, and lines of credit.

Interest Payable

The amount of interest expense that has been incurred during a period but not yet paid to creditors.

Adjusting Journal Entry

A type of entry made in the books of accounts to correct or update the financial statements to more accurately reflect the financial position of the business.