How does the purchase of equipment by signing a note affect the accounting equation?
A)assets increase; assets decrease
B)assets increase; liabilities decrease
C)assets increase; liabilities increase
D)assets increase; stockholders' equity increases

Question

Quizplus · Accepted Answer

When the equipment is purchased by signing a note, it increases the asset account (equipment) and also increases the liability account (notes payable) as the company has taken on a new liability to pay for the equipment in the future. Therefore, the accounting equation is affected by an increase in both assets and liabilities.

How Does the Purchase of Equipment by Signing a Note