According to the accounting equation,ceteris paribus,which of the following could offset an increase in profits so as to maintain equality?
A)Dividends,common shares or liabilities decrease; alternatively,assets increase.
B)Dividends or assets increase; alternatively,common shares or liabilities decrease.
C)Dividends,assets,or common shares increase; alternatively,liabilities decrease.
D)Dividends,assets,or liabilities increase; alternatively,common shares decrease.

Question

Quizplus · Accepted Answer

An increase in profits increases equity. To maintain the accounting equation (Assets = Liabilities + Equity), an increase in dividends or assets (which reduces equity or increases the other side of the equation) or a decrease in common shares or liabilities (which reduces the right side of the equation) can offset the increase in profits.

According to the Accounting Equation,ceteris Paribus,which of the Following Could