What is the effect on the statement of financial position of a business buying supplies for cash?
A)Increase asset supplies; increase asset bank
B)Decrease asset supplies; decrease asset bank
C)Decrease asset supplies; increase asset bank
D)Increase asset supplies; decrease asset bank

Question

Quizplus · Accepted Answer

When a business buys supplies for cash, it increases its assets as it acquires the supplies. The supplies account is increased while the bank account decreases, as cash is used for the purchase. Therefore, the effect on the statement of financial position would be an increase in the asset supplies and a decrease in the asset bank. Option D is the correct answer.

What Is the Effect on the Statement of Financial Position