Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 39 - No. 33)
What happens to the accounting equation when a business pays its employees' wages in cash?
Assets increase and equity increases.
Assets decrease and equity decreases.
Assets increase and liabilities increase.
Assets decrease and liabilities decrease.
Explanation
Paying wages decreases cash (an asset) and decreases equity because it represents an expense.
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