Question

Royce Corporation pays for supplies purchased in the previous month. What is the effect on the accounting equation for the payment of the supplies? (Select all that apply.)

a)Increase assets
b)Increase liabilities
c)Increase owners' equity
d)Decrease assets
e)Decrease owners' equity
f)Decrease liabilities

Answer 1

When Royce Corporation pays for supplies purchased in the previous month, it increases assets and decreases liabilities.

Step-by-step explanation:

When Royce Corporation pays for supplies purchased in the previous month, it has the following effects on the accounting equation:

1. Increase assets: The payment of supplies would result in a decrease in the company's cash or bank balance, which is an asset.
2. Decrease liabilities: If the payment is made using funds from borrowed sources, it would result in a decrease in the company's liabilities.

Therefore, the correct options from the given choices are:

• a) Increase assets
• f) Decrease liabilities