Machinery is purchased on credit.What effect does this transaction have on the accounting equation?

Question

Quizplus · Accepted Answer

Purchasing machinery on credit means that the company is getting the machinery without paying cash upfront but agreeing to pay for it later. This means that the company's assets (in the form of machinery) increase, but also its liabilities (in the form of the debt to be paid for the machinery) increase. Therefore, both sides of the accounting equation increase by the same amount, resulting in no change to shareholders' equity.

Machinery Is Purchased on Credit