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When companies purchase supplies on account, they need to create several journal entries to record the transaction in their financial statements. These entries change the balance of the elemental accounting equation, which may be a pivotal part of the bookkeeping process.
What happens when a corporation purchases supplies on account?
Purchases On Account
The account will decrease because the company pays off its outstanding bills. Any purchases made with credit are often referred to as “purchased on account.” A business that owes another entity for goods or services rendered will record the entire amount as a credit entry to increase accounts payable.
How does the acquisition of supplies for cash affect the accounting equation?
The purchase of supplies has no effect on the accounting equation. this may neither increase nor decrease assets, liabilities, and equity accounts. However, there'll be changes in each of the specific accounts in assets, particularly the supplies and cash.
Learn more about accounting equations:
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