Which of the following can be an effect of a transaction that increased an asset of a sole proprietorship 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 decrease

Question

Quizplus · Accepted Answer

For the accounting equation to balance, any increase in assets must be offset by an equal decrease in another asset or an increase in either equity or liability accounts. Since this is a sole proprietorship (single owner), an increase in equity may not be possible without additional investments or profits. Therefore, the only option is that there is an equal decrease in another asset.

Which of the Following Can Be an Effect of a Transaction