How does the purchase of equipment by signing a note affect the accounting equation? a

Accounting Dec 16, 2020

How does the purchase of equipment by signing a note affect the accounting equation?

a. assets increase; liabilities increase.

b. assets increase; assets decrease.

c. assets increase; liabilities decrease.

d. assets increase; owner's equity increases.

Expert Solution

The correct answer is option (a)

The purchase of equipment by signing a note affect the accounting equation by assets increase and liabilities increase by the same amount.

Explanation: The issue of note payable would increase the liability as it would increase the account payable. The purchase of equipment would increase the asset.

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