Explain how the following general journal entry affects the accounting equation.
A)Both assets and equity increase.
B)Both liabilities and assets increase.
C)Assets increase and equity decreases.
D)Liabilities increase and equity decreases.

Question

Explain how the following general journal entry affects the accounting equation. 
A)Both assets and equity increase. 
B)Both liabilities and assets increase. 
C)Assets increase and equity decreases. 
D)Liabilities increase and equity decreases.

Quizplus · Accepted Answer

The entry increases both assets and equity, which affects the left-hand side of the accounting equation (assets) and the right-hand side of the equation (equity), keeping them balanced. If liabilities were involved, it would affect the right-hand side (liabilities) and change the balances, indicating one of the other answer choices. But since only assets and equity are affected, the correct answer is A.

Explain How the Following General Journal Entry Affects the Accounting