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Which of the following is one effect of a purchase of $600 of supplies on credit? Select one:
a. It would decrease cash assets by $600
b. It would decrease retained earnings $600
c. It would decrease liabilities by $600
d. It would increase liabilities by $600

Respuesta :

Answer:

d. It would increase liabilities by $600

Explanation:

Supplies are part of inventory, and when inventory is purchased it increases assets.

But is it purchased against cash then there is no change as assets in the form of cash is reduced by same.

Further, if these are purchased on credit then the balance of liabilities increases as the increase in liabilities and increase in assets keep the balance sheet equation matching.

Thus, purchasing on credit will increase the liabilities.

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