Question

Bravo Co. purchased supplies on account on February 10 of this year. How does this transaction affect the accounting equation on February 10?

Answer 1

When Bravo Co. purchases supplies on account, it increases both assets and liabilities on the accounting equation.

Step-by-step explanation:

The transaction of Bravo Co. purchasing supplies on account on February 10 affects the accounting equation in the following way:

1. Assets increase: The supplies purchased will be recorded as an increase in the asset account, specifically the supplies account. This increases the total assets for Bravo Co.
2. Liabilities increase: Since the supplies were purchased on account, it means Bravo Co. has an obligation to pay for them in the future. This increases the total liabilities, specifically the accounts payable account.

Overall, the transaction increases both assets and liabilities by the same amount, which keeps the accounting equation in balance.