Question

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation? Select all that apply.
Expenses will be decreased.Equity will be increased.Equity will be decreased.Salaries expense will be increased.

Answer 1

Answer:

Equity will be decreased.

Salaries expense will be increased.

Explanation:

As paid salaries are an expense, the total amount of salaries expense will certainly increase (no matter if it is paid or not). Since salaries expense is not a balance sheet item, it has to be represented through an item in it. Equity  will be decreased through the decrease of retained earnings (equity item), which is the result of increased expenses.