Question

To keep the accounting equation in balance, an increase in an asset may be coupled with a(n) A : decrease in a liability. B : decrease in stockholder’s equity. C : increase in another asset. D : decrease in another asset.

Answer 1

Answer:

D. Decrease in another asset.

Explanation:

In balance sheet

Shareholder's equity = Assets - Liabilities

If there's an increase in a particular asset, to keep the equation in balance, there need to be a proportionate decrease in another asset. An increase in an asset without a decrease in another results in an unbalanced equation.

Decreasing the liabilities or shareholder's equity wouldn't be able to balance an equation where an asset was increased. Also, increasing another asset would only create a larger gap instead of balancing the equation.