A purchase of a vehicle on credit would have what effect on the accounting equation?

A) Total Assets and total Liabilities increase.
B) Total Liabilities are overstated.
C) Total Owner's Equity is overstated.
D) Both A and B are correct.

Accounting Equation

The foundational principle of accounting representing the relationship between a company’s assets, liabilities, and equity: Assets = Liabilities + Equity.

Vehicle

A means of transportation, such as a car, truck, motorcycle, or bicycle, that facilitates the movement of people or goods from one place to another.

Credit

Credit refers to the trust which allows one party to provide resources to another party wherein the second party does not reimburse the first party immediately but promises either to repay or return those resources at a later date.