Question

What is the impact on the Accounting Equation when Rosemary pays $250 CASH to buy office supplies from Dwight at Dunder-Mifflin?

a) Assets decrease; Liabilities decrease
b) Assets decrease; Owner's equity decreases
c) Assets increase; Owner's equity decreases
d) Liabilities increase; Owner's equity decreases

Answer 1

When Rosemary pays $250 cash to buy office supplies, the impact on the Accounting Equation is that assets decrease and owner's equity decreases.

Step-by-step explanation:

The impact on the Accounting Equation when Rosemary pays $250 cash to buy office supplies from Dwight at Dunder-Mifflin is option b) Assets decrease; Owner's equity decreases.

The Accounting Equation is Assets = Liabilities + Owner's equity. When Rosemary pays cash to buy office supplies, the assets decrease because cash is being used as a payment. Additionally, since owner's equity represents the owner's investment in the business, it also decreases.