During March, Honeybaked Spam purchased supplies for cash. The supplies will be

Question

During March, Honeybaked Spam purchased supplies for cash. The supplies will be used in April. What effect does this transaction have on the accounting equation at the time the supplies are purchased?

a. There is no effect on the accounting equation, as one asset account increases while another asset account decreases.

b. There is no effect on the accounting equation, as the transaction should not be recognized until April.

c. Assets and liabilities increase.

d. Assets increase and stockholders' equity decreases.

Explanation / Answer

c. Assets and liabilities increase.

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