If a company buys inventory on account:
A) cash would decrease.
B) accounts payable would increase.
C) net income would increase.
D) common Stock would decrease.

Question

Quizplus · Accepted Answer

When a company buys inventory on account, they are essentially purchasing the inventory on credit. This means that they are acquiring the inventory without immediately paying for it with cash. Therefore, choice A is incorrect since cash is not decreasing at the time of purchase. Choice C is also incorrect since net income is not affected by this transaction. Choice D is incorrect since common stock is not related to inventory purchases. The correct answer is choice B, as the company's accounts payable account would increase to reflect the amount of the purchase that has not yet been paid for.

If a Company Buys Inventory on Account