If a transaction increased an asset of a business. Which of the following can be an effect of the transaction for the accounting equation to balance?
A)There is an equal decrease in another asset.
B)There is an equal decrease in equity.
C)There is an equal decrease in a liability account.
D)Both liabilities and equity decreases.

Question

Quizplus · Accepted Answer

According to the accounting equation, assets = liabilities + equity. If an asset increases, either a liability or equity must also increase to balance the equation. However, none of the given options mention an increase in liability or equity. Therefore, the only way to balance the equation is to decrease another asset by an equal amount.

If a Transaction Increased an Asset of a Business