Pizitz Company experienced a business event that affected its financial statements as indicated below.

Which of the following events could have caused these effects?

Question

Pizitz Company experienced a business event that affected its financial statements as indicated below.

Which of the following events could have caused these effects?

Quizplus · Accepted Answer

Paying cash to purchase supplies is an asset exchange transaction. One asset (cash) decreases and another asset (supplies) increases. Total assets are not affected. The income statement is not affected at the time supplies are purchased. Instead, the income statement will be affected at the time the amount of supplies used is determined at the end of the accounting period. Since cash was paid to purchase the supplies, there will be a cash outflow from operating activities shown on the statement of cash flows.

Pizitz Company Experienced a Business Event That Affected Its Financial