If total assets are increased, there must be a corresponding
A)increase in liabilities only.
B)increase in shareholders' equity only.
C)increase in liabilities and decrease in shareholders' equity.
D)increase in liabilities and/or increase in shareholders' equity.

Question

Quizplus · Accepted Answer

When total assets increase, it can be due to an increase in liabilities (e.g., borrowing more money) and/or an increase in shareholders' equity (e.g., issuing more stock or retaining more earnings). Both are sources of financing that can be used to acquire more assets.

If Total Assets Are Increased, There Must Be a Corresponding