For the following transaction, identify the type of change that would have occurred in the accounting equation: Assets = Liabilities + Share capital + Opening retained profits + Revenue - Expenses - Dividends
Inventory was purchased on credit.
A) An asset increased and another asset decreased.
B) An asset decreased and an expense increased.
C) An asset decreased and a liability decreased.
D) A liability increased and an asset increased.

Question

Quizplus · Accepted Answer

Since inventory was purchased on credit, there will be an increase in inventory, which is an asset, and an increase in accounts payable, which is a liability. Therefore, the accounting equation will change as follows: Assets increase (due to inventory) and liabilities increase (due to accounts payable), but there is no change in share capital, opening retained profits, revenue, expenses, or dividends.

For the Following Transaction, Identify the Type of Change That