CIMA BA3 · Chapter 3 · Question 8 of 10
A business buys a machine on credit. What is the effect of this transaction on the accounting equation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Assets increase and liabilities increase
Explanation
The machine is a new asset and the amount owed to the supplier is a new liability, so both sides of the equation increase by the same amount. Capital is unaffected because no income or expense arises.
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