Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 19 - No. 4)
If a business purchases goods on credit, what is the effect on the accounting equation?
Increase assets, increase liabilities.
Decrease assets, decrease liabilities.
Increase assets, increase equity.
Decrease assets, increase equity.
Explanation
Purchasing goods increases the inventory asset and increases the liability (accounts payable).
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