Star Homes Corporation just recorded a transaction in its books of accounts.If this transaction increased the total liabilities by $7,000,then ________.

Question

Quizplus · Accepted Answer

The increase in liabilities should be balanced by either an increase in assets or a decrease in equity. Therefore, option A is the correct answer as it suggests that assets must increase, or equity must decrease, by $7,000. Option B is incorrect as it suggests that either assets or equity must decrease, which is not necessarily true. Option C is incorrect as both assets and equity do not necessarily have to each decrease by the same amount. Option D is incorrect as it suggests that assets must decrease, which is not necessarily true.

Star Homes Corporation Just Recorded a Transaction in Its Books