Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 20 - No. 11)
What is the effect on the accounting equation when a company buys inventory with cash?
Assets increase, liabilities increase.
Assets decrease, liabilities increase.
Assets decrease, equity decreases.
The composition of assets changes; no net effect.
Explanation
Cash is exchanged for inventory, changing the composition of assets but not the total.
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