Company A decided to expand its office space and purchased 20 new desks and chairs from...
Company A decided to expand its office space and purchased 20 new desks and chairs from a supplier on July 1st. The desks and chairs were purchased on credit, and the company had 60 days to pay for them. Company A paid for the desks and chairs on August 15th.
How would the transaction on August 15th impact the accounting equation of Company A?
A. Increase assets and increase liabilities
B. Increase liabilities and decrease owners' equity
C. Decrease assets and decrease liabilities
D. Decrease liabilities and increase owners' equity
Homework Answers
Accounts payable will be credited on July 1 when the chairs are purchased on credit
While making payment on Aug 15, Accounts payable will be debited and cash will be credited
Leading to a decrease in liabilities and decrease in cash, no effect on equity
Hence, the answer is
C. Decrease assets and decrease liabilities
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