Stephanie purchased $10,000 of new electronic equipment for her DJ Company on account. The effect on the basic accounting equation was to
A) decrease Cash $10,000 and increase Equipment $10,000.
B) increase Equipment $10,000 and increase Accounts Payable $10,000.
C) decrease Cash $10,000 and increase Accounts Payable $10,000.
D) increase Cash $10,000 and increase Equipment $10,000.

Question

Quizplus · Accepted Answer

Purchasing equipment on account increases Equipment (an asset) by $10,000 and also increases Accounts Payable (a liability) by $10,000, reflecting the obligation to pay for the equipment in the future. Cash is not affected since the purchase was made on account, not with cash.

Stephanie Purchased $10,000 of New Electronic Equipment for Her DJ