The Effect on Total Assets of the Purchase of Supplies

question 2

Multiple Choice

The effect on total assets of the purchase of supplies for cash is which of the following?

• A)An increase in total assets.
• B)A decrease in total assets.
• C)Total assets remain unchanged.
• D)An increase in total assets and total liabilities.

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Definitions:

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen.

Explicit Costs

Direct, out-of-pocket payments for expenses incurred in conducting business, such as wages, rent, and materials.

Implicit Costs

The opportunity costs that are not directly paid for or incurred in transactions but represent real costs to a business.

Implicit Costs

refer to the opportunity costs that occur when a company uses internal resources that could have been used for another purpose but do not directly affect cash flow.