Question

Collins Landscape Company purchased various landscaping supplies on account to be used for landscape designs for their customers. How will this business transaction affect the accounting equation

Answer 1

Answer:

Increase Assets (Supplies) and increase Liabilities (Accounts Payable).

Explanation:

In accounting the accounting equation is the basis for double entry recording of transactions. For every debit there must be an equal and credit.

Accounting equation= Liabilities+ Owners Equity

When Collins Landscape company made the purchase of landscaping supplies on account. That means the transaction was not payed for with cash, so there is an increase in accounts payable (a liability account)

We have an increase in landscaping supplies so Assets increases.

The journal entry will be a debit to Asset (supplies)to increase it, and a credit to account payable bro increase it.