To maintain the balance sheet equality, it is necessary to report every event and transaction in a dual manner. If a transaction results in an increase in the left hand side of the balance sheet, dual transactions recording requires that which of the following must occur, to maintain the balance sheet equation?
A)decrease another asset
B)increase a liability
C)increase shareholders equity
D)all of the above will maintain the balance sheet equation
E)none of the above

Question

Quizplus · Accepted Answer

To maintain balance sheet equality, any increase or decrease in assets must have a corresponding increase or decrease in liabilities or shareholders' equity. Therefore, to balance an increase in one asset, one of the following options that maintain the balance sheet equality must occur: decrease another asset, increase a liability or increase shareholders equity. Therefore, all of the above options will maintain the balance sheet equation.

To Maintain the Balance Sheet Equality, It Is Necessary to Report