BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase in both asset and capital
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Decrease in both asset and liability
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Increase in both asset and liability
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Increase in asset and decreased in liability
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Detailed explanation-1: -Increase an asset and increase a liability (asset source event). A customer pays for a service upfront. This will cause cash (asset) to increase and unearned revenue (liability) to increase.
Detailed explanation-2: -When goods are purchased on credit, stock increases which is an asset and creditors increase, which is a liability.
Detailed explanation-3: -Buy Inventory on Credit This increases the inventory (Asset) account and increases the accounts payable (Liability) account.
Detailed explanation-4: -If the company pays cash for a new delivery van, one asset (cash) will decrease and another asset (vehicles) will increase. If a company provides a service to a client and immediately receives cash, the company’s assets increase and the company’s owner’s equity will increase because it has earned revenue.