Question

Cool Taste Company purchased $1,500 of supplies with cash. What effect does this transaction have on the accounting equation?

Answer 1

Answer:

None

Explanation:

This transaction has a nil effect on the accounting equation.

The accounting equation is as given below;

Assets = Liabilities + Equity

The purchase of supplies with cash is a credit to cash and a debit to inventory. This represents a decrease in one asset and an increase in another of the same amount.

Hence no change happens to the equation.

The liabilities and equity account are not affected by the transaction.