Country Homes Company just recorded a transaction in its books.If this transaction increased the total liabilities by $16,000,then ________.

Question

Quizplus · Accepted Answer

There are two sides to every transaction - the debit (increase) and the credit (decrease). If a transaction increased the total liabilities by $16,000, then there must have been a credit of $16,000. To balance this out, there must have been a corresponding debit to either assets or equity. Therefore, the answer is A - assets must increase, or equity must decrease by $16,000.

Country Homes Company Just Recorded a Transaction in Its Books