To determine which pair of accounts is increased by recording a credit, we need to understand the basic principles of double-entry accounting.
When a credit is recorded in an accounting system, it typically increases either a liability, revenue, or equity account, while it decreases either an asset or expense account.
Let’s examine the options:
- a. Common Stock and Rent Expense: Crediting common stock increases equity, but rent expense is an account that would be debited, which means it does not fit this scenario.
- b. Cash and Accounts Receivable: Crediting cash would reduce it, whereas accounts receivable would generally be debited when cash is received, making this option incorrect.
- c. Treasury Stock and Common Stock: Crediting common stock would increase equity, but treasury stock is a contra-equity account that would not typically be increased by a credit. Hence, this option isn’t correct.
- d. Notes Payable and Service Revenue: Crediting notes payable increases a liability, and crediting service revenue increases equity. Thus, both accounts can be increased by recording a credit.
Therefore, the correct answer is d. notes payable and service revenue. This option accurately reflects the accounts that are both increased when recording a credit entry.