In a charitable action, one firm is relieved of an obligation to a second firm. As a result, the debtor firm debits: A) An asset B) A liability C) A revenue D) An owners’ equity account Answer is liability. Just wondering why? The debtor received an asset so the journal entry would be Dr Donated Asset Cr Contributed Capital How does it debit a liability???
You’re confusing the debtor with the creditor. The debtor is the firm saddled with the obligation; the _ creditor _ is the firm to which the obligation is owed.
The debtor debits the liability and credits the asset. The creditor debits the asset and credits something: a receivable, perhaps, or contributed capital, or some such.