Bob purchased a new computer for the company on account. The transaction will
A) increase Computer; increase Capital.
B) decrease Cash; increase Accounts Payable.
C) decrease Cash; increase Computer.
D) increase Computer; increase Accounts Payable.

Question

Quizplus · Accepted Answer

When purchasing a computer on account, it means that the company did not pay cash upfront but instead agreed to pay for it at a later time. Therefore, there will be an increase in Computer (an asset) since the company now owns it, and an increase of an equivalent amount in Accounts Payable (a liability) since the company owes the supplier for this purchase. Option A is not correct because Capital (an equity account) does not change with this transaction. Option B is incorrect because Accounts Payable increases instead of decreasing, and Cash decreases only if the company paid cash upfront. Option C is incorrect because Cash decreases only if the company paid cash upfront.

Bob Purchased a New Computer for the Company on Account