Question

If a company uses $1,410 of its cash to purchase supplies, the effect on the accounting equation would be:

Answer 1

The above mentioned transaction will affect the Assets side of the accounting equation or the Assets side of the balance sheet

Since we use cash of $1,410 the cash account would be debited with $1,410. In other words cash will be reduced by $1,410

Since the cash is used to purchase supplies, the inventory will be credited with $1,410. This means the inventory would be increased by $1,410.

Hence in conclusion, the two accounting activities would be a debit of $1,410 on cash and a credit of $1,410 on the inventory. So the net of the Assets remains unchanged.