Which of the following shows how paying cash to purchase supplies will affect a company's financial statements?

Question

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.

Which of the Following Shows How Paying Cash to Purchase