Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 21 - No. 28)
What is the effect of an increase in inventory on the accounting equation?
Increases assets, decreases liabilities.
Increases assets, decreases equity.
Increases assets, increases assets.
Decreases assets, decreases liabilities.
Explanation
An increase in inventory means that one asset (cash in the case of a purchase) changes to another asset (inventory).
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