The Purchase of an Asset on Credit

question 46

Multiple Choice

The purchase of an asset on credit

• A)increases assets and stockholders' equity.
• B)increases assets and liabilities.
• C)decreases assets and increases liabilities.
• D)leaves total assets unchanged.

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Definitions:

Borrowed Money

Funds that an individual or entity has received from another party under the condition that it is to be repaid, typically with interest, at a later date.

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Owners' Equity, depicting a company's financial position at a specific point in time.

Bank

A financial institution licensed to receive deposits, offer loans, and provide various financial services to individuals and businesses.

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.