If a Transaction Causes an Equity Account to Increase, Which

question 44

Multiple Choice

If a transaction causes an equity account to increase, which of these related effects may also occur?

• A) An increase of an equal amount in a liability account.
• B) An increase of an equal amount in an asset account.
• C) A decrease of an equal amount in an asset account.
• D) An increase of an equal amount in another equity account.

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Definitions:

Circular-Flow Diagram

A visual model that shows how money moves through an economy, typically between households and firms.

Firm

An organization or business entity engaged in commercial, industrial, or professional activities, typically with the aim of generating profit.

Normative

Relating to an evaluative or prescriptive standard or principle, often regarding moral or ethical considerations.

Value Judgments

assessments based on personal views about the worth, beauty, or morality of something, rather than on measurable criteria.