Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 22 - No. 16)
What is the effect on the accounting equation when a company pays rent via cheque?
Assets increase, owner's equity decreases.
Assets decrease, liabilities increase.
Assets decrease, owner's equity decreases.
Assets increase, owner's equity increases.
Explanation
Cash is used to pay the rent, so the assets (cash) decrease, while equity (retained earnings, as a result of an expense) decreases.
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