Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 40 - No. 38)
When a business borrows money from a bank, what is the impact on the accounting equation?
Assets increase, liabilities decrease.
Assets decrease, liabilities increase.
Assets increase, liabilities increase.
Assets decrease, equity increases.
Explanation
The business's cash (an asset) increases, and its loan payable (a liability) also increases.
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