A company purchased supplies of $2,000 on account.How does this transaction affect the accounting equation?
A)Add $2,000 to Supplies and add $2,000 to Notes Payable.
B)Add $2,000 to Supplies and subtract $2,000 from Cash.
C)Add $2,000 to Supplies Expense and add $2,000 to Notes Payable.
D)Add $2,000 to Supplies and add $2,000 to Accounts Payable.

Question

Quizplus · Accepted Answer

The transaction of purchasing supplies on account means that the company has received the supplies but has not yet paid for them in cash. Therefore, the accounting equation is affected by increasing the asset (Supplies) and increasing the liability (Accounts Payable) by $2,000 each. Option D correctly reflects this impact on the accounting equation.

A Company Purchased Supplies of $2,000 on Account