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

  • a) Assets increase, assets decrease.
  • b) Assets increase, liabilities decrease
  • c) Assets increase, liabilities increase
  • d) Assets increase, owners equity increase
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Accounting equation: Assets = Liabilities + Owner’s Equity Equipment is purchased by note. It means equipment is borrowed and payment is to be paid later. Both assets and liabilities are increased in same amount, while equity value has not changed. More on accounting equation in lecture handout.
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