Question

What is the impact on the Accounting Equation when Rosemary pays her niece $50 to help her organize the office?

a) Assets decrease; Liabilities decrease
b) Assets decrease; Owner's equity decreases
c) Assets increase; Liabilities increase
d) Liabilities decrease; Owner's equity increases

Answer 1

When Rosemary pays her niece $50 to help her organize the office, the impact on the Accounting Equation is that Assets decrease; Owner's equity decreases.

Step-by-step explanation:

When Rosemary pays her niece $50 to help her organize the office, the impact on the Accounting Equation is that Assets decrease; Owner's equity decreases. This is because paying her niece represents a decrease in assets (cash) and a decrease in owner's equity (Rosemary's personal investment in the business). The equation is: Assets = Liabilities + Owner's equity. When assets decrease, owner's equity also decreases.