Question

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

Decrease cash; increase supplies.

Answer 1

Decrease cash; increase supplies.

Step-by-step explanation:

The accounting equation is shown below:

Total assets = Total liabilities + Shareholder's equity

In the given transaction, the office supplies were purchased for $100 and it is paid immediately which means the balance of supplies is increased and the cash balance is decreased.

It gives a positive impact on the office supplies account and a negative impact on the cash balance under the current assets.