Question

Which of the following are possible effects on the accounting equation when recording a transaction that affects two accounts? (Select all that apply.)

-One asset account increases and one asset account decreases.
-One asset account decreases and total shareholders' equity increases.
-One asset account increases and total shareholders' equity increases.
-One asset account increases and total shareholders' equity decreases.
-One asset account increases and one liability account increases.
-One liability account increases and total shareholders' equity decreases

Answer 1

Possible effects on the accounting equation when recording a transaction that affects two accounts are: one asset account increases and one asset account decreases, one asset account increases and total shareholders' equity increases, and one asset account increases and total shareholders' equity decreases.

Step-by-step explanation:

When recording a transaction that affects two accounts, the possible effects on the accounting equation are:

1. One asset account increases and one asset account decreases. For example, if a company purchases inventory (an asset), its cash (another asset) would decrease.
2. One asset account increases and total shareholders' equity increases. For instance, if a company issues new shares to investors (increasing its shareholders' equity) and receives cash (increasing its assets).
3. One asset account increases and total shareholders' equity decreases. For instance, if a company distributes dividends (decreasing its shareholders' equity) and receives cash (increasing its assets).