Question

To keep the accounting equation in balance, an increase in an asset may be coupled with a(n) A : decrease in a liability. B : decrease in stockholder’s equity. C : increase in another asset. D : decrease in another asset.

Answer 1

An increase in an asset in the accounting equation can be balanced by either a decrease in another asset, an increase in another asset, a decrease in a liability, or a decrease in stockholder's equity, maintaining the core principle of double-entry bookkeeping where at least two accounts are affected.

Step-by-step explanation:

The accounting equation ensures that a company's balance sheet remains balanced, which means that assets always equal liabilities plus stockholder's equity. In the context of a T-account, an increase in an asset may be counterbalanced in a few different ways to maintain this balance. The possible couplings for an increase in an asset could be:

• A decrease in a liability (Option A).
• A decrease in stockholder's equity (Option B).
• An increase in another asset (Option C).
• A decrease in another asset (Option D).

To answer the student's question: an increase in an asset may be coupled with a decrease in another asset (Option D), an increase in another asset (Option C), a decrease in a liability (Option A), or a decrease in stockholder's equity (Option B) to keep the accounting equation in balance. It is important to understand that when transactions occur, at least two accounts will always be affected due to this fundamental concept of double-entry bookkeeping.

Answer 2

D. Decrease in another asset.

Step-by-step explanation:

In balance sheet

Shareholder's equity = Assets - Liabilities

If there's an increase in a particular asset, to keep the equation in balance, there need to be a proportionate decrease in another asset. An increase in an asset without a decrease in another results in an unbalanced equation.

Decreasing the liabilities or shareholder's equity wouldn't be able to balance an equation where an asset was increased. Also, increasing another asset would only create a larger gap instead of balancing the equation.