How should an increase in proprietorship be recorded in T-accounts?

An increase in proprietorship, which represents the owner's equity in a business, should be recorded as a credit in T-accounts. In accounting, equity accounts, including proprietorship, are increased by credits. This reflects the notion that when the owner invests additional funds into the business or the business generates profits, the value of the owner's equity increases.

When you credit the proprietorship account, you acknowledge the increase in the owner’s claim on the net assets of the business. This aligns with the accounting equation, which states that assets equal liabilities plus equity. Therefore, as equity increases with a credit entry, it supports the overall balance of the equation.

In contrast, other options do not accurately represent the nature of the transaction related to an increase in proprietorship. For instance, debiting proprietorship would suggest a decrease in owner's equity, which contradicts the scenario presented. Similarly, crediting liabilities or debiting liabilities does not involve the equity account, as they pertain to different aspects of the accounting equation. The specific act of crediting proprietorship directly captures the increase in owner equity, aligning well with accepted accounting practices.