Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 26 - No. 25)
When a company purchases equipment for cash, what is the effect on the accounting equation?
Assets increase, Liabilities increase, Equity stays the same
Assets increase, Liabilities decrease, Equity increases
Assets decrease, Liabilities increase, Equity increases
Assets decrease, Equity stays the same
Explanation
One asset (cash) is exchanged for another asset (equipment), so no overall change is made.
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