ACCA FA · Chapter 3 · Question 10 of 10
A business buys a delivery van on credit. What is the effect on the accounting equation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Assets increase and liabilities increase
Explanation
The van is a new non-current asset, so assets increase. Since it was bought on credit, a liability to the supplier is created for the same amount. The accounting equation (assets = capital + liabilities) remains in balance and capital is unaffected.
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