Asked by Amanda Nazimi on Jul 29, 2024
Verified
What would be the effect on the accounts if the business purchased equipment on account?
A) An asset would be debited and an expense debited.
B) Expense would be debited and Liability credited.
C) An asset would be debited and Liability debited.
D) An asset would be debited and a Liability credited.
Equipment
denotes tangible assets used in operations, such as machinery or office equipment, which have a useful life beyond one accounting period.
Liability
A company's financial debt or obligations that arise during the course of its business operations.
Expense
An expense constitutes the money spent or cost incurred in an organization's efforts to generate revenue, representing the consumption of assets.
- Determine the appropriate method for documenting acquisitions and costs, irrespective of whether they are settled in cash or credited.
- Understand the characteristics of asset, liability, capital, revenue, and expense accounts, along with their typical balances.
Verified Answer
MN
Muhammad NaeemAug 02, 2024
Final Answer :
D
Explanation :
When a business purchases equipment on account, it acquires a new asset (the equipment) and incurs a liability (the obligation to pay for the equipment later). Therefore, the asset account for the equipment increases (debit) and the liability account (such as accounts payable) also increases (credit).
Learning Objectives
- Determine the appropriate method for documenting acquisitions and costs, irrespective of whether they are settled in cash or credited.
- Understand the characteristics of asset, liability, capital, revenue, and expense accounts, along with their typical balances.