Certified Specialist In Pediatrics Practice Exam

A company purchases office supplies on account for $1,200. How does this transaction affect the accounting equation?

Assets increase and liabilities decrease Assets decrease and equity decreases Assets increase and liabilities increase Assets increase and equity increases

Correct Answer:

Assets increase and liabilities increase

Explanation:

Purchasing supplies on account increases assets (Supplies) and increases liabilities (Accounts Payable) by $1,200.

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