What effect does the purchase of store equipment on account have on the balance sheet equation?
A)Assets increase and liabilities decrease
B)Assets increase and liabilities increase
C)Assets decrease and liabilities decrease
D)Assets decrease and liabilities increase
E)There is no effect on the accounting equation.

Question

Quizplus · Accepted Answer

The purchase of store equipment on account increases the assets of the business, specifically the fixed assets account, which is a part of the total assets of the business listed on the balance sheet. At the same time, the business incurs a liability to the vendor or supplier, which is reflected in the accounts payable account separately from other short-term and long-term liabilities. Therefore, both assets and liabilities increase, and the balance sheet equation remains in balance.

What Effect Does the Purchase of Store Equipment on Account