The purchase of an asset on credit
A) increases assets and shareholders' equity.
B) increases assets and liabilities.
C) decreases assets and increases liabilities.
D) has no effect on total assets.

Question

Quizplus · Accepted Answer

When an asset is purchased on credit, the asset account increases because the company now owns more assets, and the liabilities account also increases because the company has an obligation to pay for the asset in the future.

The Purchase of an Asset on Credit