Question

When an organisation purchases a machine for cash, which of the following is true? Select one: a. Total assets increase. b. Total liabilities decrease. c. Total expenses increase. d. Total equity stays the same

Answer 1

When an organization purchases a machine for cash, the correct statement is: a. Total assets increase.

Step-by-step explanation:

When a machine is bought for cash, it results in a direct exchange of assets—cash is used to acquire the machine. This transaction impacts the balance sheet. Total assets increase because the organization now possesses a new machine. Total liabilities, expenses, and equity are not directly affected in this transaction.

Liabilities remain unchanged, as the purchase is made with available cash, not debt. Expenses are related to operational costs, and equity is not directly influenced by a cash purchase of an asset.

Option A) Total assets increase.