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Question

When goods are purchased on credit, what will be the impact in accounting equation?


A

Assets - Decrease
Liabilities - No effect
Capital - Decrease

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B

Assets - Increase
Liabilities - Increase
Capital - No effect

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C

Assets - No effect
Liabilities - Decrease
Capital - Increase

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D

Assets - Increase
Liabilities - No effect
Capital - Decrease

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Solution

The correct option is B

Assets - Increase
Liabilities - Increase
Capital - No effect


When goods are purchased on credit, stock increases which is an asset and creditors increase, which is a liability.


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