The purchase of supplies with both cash and on account was recorded as only an open account purchase. Due to this error:
A) Assets would be understated.
B) Liabilities would be overstated.
C) Owner's Equity would be overstated.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

Recording the purchase of supplies as only an open account purchase (on credit) would increase liabilities more than if the purchase had been correctly split between cash and credit. This is because the cash portion, which should reduce assets (cash), is instead incorrectly increasing liabilities.

The Purchase of Supplies with Both Cash and on Account