Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 27 - No. 12)
What is the effect on the accounting equation when a company purchases equipment on credit?
Assets increase, Liabilities increase, Equity stays same
Assets increase, Liabilities increase, Equity increases
Assets decrease, Liabilities increase, Equity increases
Assets decrease, Liabilities increase, Equity stays same
Explanation
The purchase of equipment on credit increases an asset (equipment) and increases a liability (accounts payable).
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