Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 32 - No. 2)
If a company purchases land for $20,000 cash and a $30,000 mortgage, what will be the effect on the balance sheet?
Assets Increase, Liabilities increase, Equity remains same
Assets increase, Liabilities decrease, Equity increases
Assets decrease, Liabilities increase, Equity decreases
Assets decrease, Liabilities increase, Equity remains the same
Explanation
Assets increase (land) and decrease (cash). Liabilities increases (mortgage).
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