How Does the Purchase of Supplies on Account Affect the Accounting

question 119

Multiple Choice

How does the purchase of supplies on account affect the accounting equation?

• A) Assets increase; Liabilities decrease
• B) Assets increase; Owner's Equity increases
• C) Assets increase; Liabilities increase
• D) Liabilities increase; Owner's Equity decreases

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Definitions:

Interest

The cost of borrowing money or the return on investment for savings and investments, typically expressed as an annual percentage rate.

Risk Averse

Describing individuals or entities that prefer to avoid risk and would rather choose an alternative with a more certain but possibly lower return, than an option with a higher but uncertain return.

Utility Function

A mathematical representation that relates an individual’s consumption bundle to the level of satisfaction or utility derived from it.

Marginal Utility

The additional satisfaction or utility gained from consuming or using one more unit of a good or service.