Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 39 - No. 17)
What effect does the payment of salaries have on a business's accounting equation?
Increases assets and decreases liabilities
Decreases assets and decreases owner's equity
Increases assets and increases owner's equity
Decreases assets and increases owner's equity
Explanation
Paying salaries decreases cash (asset) and increases salaries expense, which reduces owner's equity.
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