Certified Fraud Examiner Practice Exam 2026 – All-in-One Guide to Master Your Certification!

The correct answer highlights the nature of credits in accounting, particularly regarding their impact on different types of accounts. When a credit is applied, it tends to decrease asset and expense accounts while simultaneously increasing liabilities, revenues, and owner's equity.

To elaborate, asset accounts represent resources owned by the organization, such as cash, inventory, and property. When a credit is made to an asset account, it reduces the total assets recorded. Similarly, expense accounts reflect costs incurred, and a credit to these accounts decreases overall expenses.

On the contrary, liabilities are obligations owed by the company, and credits increase these accounts, reflecting greater amounts owed to creditors. Revenues, which represent income generated from business activities, also increase with credits, positively impacting the financial status of the organization. Finally, owner's equity represents the residual interest in the assets after deducting liabilities, and credits contribute to an increase in this equity.

The other options do not accurately depict the way credits function within the accounting framework, thereby reinforcing the correctness of the chosen answer.