Question

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

Answer 1

Answer:

Asset will increase by $75,000 (DR) and liability will as well increase by $75,000 (CR)

Explanation:

With the purchase of Office Equipment for $75,000, Assets balance will increase (DR)  and  liability balance (i.e account payable) will equally increase with the same amount.

Asset naturally has a debit balance. Any addition will be debited and then the balance will increase.

Liability has a credit balance. Any addition will be credited, hence increase the balance of the liability.