Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 16 - No. 27)
When a business purchases supplies for cash, how does this affect the accounting equation?
Assets increase, liabilities increase.
Assets decrease, liabilities decrease.
Assets increase, liabilities decrease.
The composition of assets changes; no net effect.
Explanation
The total assets remain the same; Supplies (an asset) increases, and Cash (an asset) decreases.
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