Question

A purchase of an asset for immediate consumption that will not be paid for until next month would cause liabilities to increase and stockholders’ equity to decrease this month.

O True O False

Answer 1

False

Step-by-step explanation:

When an asset is purchased for immediate consumption and it will be paid for next month the company will have an accounts payable. So in this case the purchase of the asset would increase the assets of the company and increase accounts payable a liability by the same amount. Stock holders equity will remain unchanged by this transaction therefore this statement is false, as this transaction will only affect assets and liabilities.