What is the effect on the balance sheet when the business buys inventory on credit?
A) increase asset inventory; increase liability creditor
B) decrease asset inventory; increase liability creditor
C) decrease asset inventory; decrease liability creditor
D) increase asset inventory; increase equity

Question

Quizplus · Accepted Answer

When a business buys inventory on credit, there is an increase in assets (inventory) and an increase in liabilities (creditors). This is because the business has received the inventory but has not yet paid for it, resulting in an increase in accounts payable (a type of creditor liability).

What Is the Effect on the Balance Sheet When the Business