PRC-1 · Chapter 1 · Question 53 of 100
'BlueSky IT' purchased a new server for Rs. 200,000 on credit from 'Tech World'. What are the direct effects of this transaction on the elements of the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Increase in an asset, increase in a liability
Explanation
Purchasing equipment on credit increases the non-current assets (the server) and simultaneously increases the current liabilities (accounts payable) owed to the supplier.
More Accounting Basics MCQs
- Q55Which of the following stakeholders is classified strictly as an 'external user' of a company's financial statements?
- Q56Which accounting principle strictly dictates that a business must record an expense in the period it is incurred, regardless of when the…
- Q57The universally recognized accounting standards that guide the preparation of financial statements across many countries are known as…
- Q58'Rapid Logistics' spent Rs. 150,000 on major structural alterations to their delivery vans, which permanently increased their payload…
- Q59If a business acquires a machine on a long-term lease and records it as an asset despite not holding the legal title, it is applying which…