What is the impact on the accounting equation of recording the issuance of a short-term note payable?
A)Both assets and liabilities increase.
B)Both assets and stockholders' equity decrease.
C)Both assets and stockholders' equity increase.
D)Liabilities increase and stockholders' equity decreases.

Question

Quizplus · Accepted Answer

When a company issues a short-term note payable, it receives cash or other assets, increasing the assets side of the accounting equation. Simultaneously, the note payable is a liability, so the liabilities side also increases. The accounting equation (Assets = Liabilities + Stockholders' Equity) remains in balance with both assets and liabilities increasing.

What Is the Impact on the Accounting Equation of Recording