Final answer:
When a company purchases equipment by signing a note, it impacts the accounting equation by affecting both the assets and liabilities of the company.
Step-by-step explanation:
When a company purchases equipment by signing a note, it impacts the accounting equation by affecting both the assets and liabilities of the company. The purchase of equipment is considered an investment and therefore increases the value of the company's assets. At the same time, the company incurs a liability in the form of the note or loan taken to finance the equipment purchase.
For example, let's say a company purchases equipment for $10,000 by signing a note. The accounting equation, which states that assets equal liabilities plus equity, would be impacted as follows:
- The company's assets increase by $10,000, which represents the value of the equipment.
- The company's liabilities increase by $10,000, which represents the amount of the note or loan taken to finance the equipment purchase.
Overall, the accounting equation remains balanced because both sides of the equation increase by the same amount.