Which of the following is NOT possible for a business transaction?Group of answer choicesDecrease Liabilities and Decrease AssetsIncrease Assets and increase RevenueIncrease Liabilities and Increase Shareholder EquityIncrease Liabilities and increase Expense
Question
Which of the following is NOT possible for a business transaction?Group of answer choicesDecrease Liabilities and Decrease AssetsIncrease Assets and increase RevenueIncrease Liabilities and Increase Shareholder EquityIncrease Liabilities and increase Expense
Solution 1
The option that is NOT possible for a business transaction is "Decrease Liabilities and Decrease Assets".
Here's why:
-
Decrease Liabilities and Decrease Assets: This is not possible because when a company pays off its liabilities (decreasing liabilities), it uses its assets. This would decrease the assets. However, a decrease in liabilities does not necessarily mean a decrease in assets. For example, if a company pays off a debt (decrease in liability) with cash (an asset), the cash account (asset) would decrease. But the overall assets might not decrease if the company has other assets.
-
Increase Assets and increase Revenue: This is possible. When a company earns revenue, it often increases its assets. For example, if a company sells a product, it increases its cash or accounts receivable (both assets) and its revenue.
-
Increase Liabilities and Increase Shareholder Equity: This is also possible. When a company borrows money, it increases its liabilities. But this also increases its cash, which can increase shareholder equity.
-
Increase Liabilities and increase Expense: This is possible as well. When a company incurs an expense, it might increase its liabilities. For example, if a company purchases supplies on credit, it increases its accounts payable (a liability) and its expenses.
Solution 2
The option that is NOT possible for a business transaction is "Decrease Liabilities and Decrease Assets".
Here's why:
-
Decrease Liabilities and Decrease Assets: This is not possible because when a company pays off its liabilities, it uses its assets. Therefore, both liabilities and assets decrease. However, in a single transaction, a company cannot decrease both its liabilities and assets.
-
Increase Assets and increase Revenue: This is possible. When a company earns revenue, it increases its assets.
-
Increase Liabilities and Increase Shareholder Equity: This is also possible. When a company borrows money, it increases its liabilities. But, it also increases its shareholder equity because the borrowed money can be used to generate profits.
-
Increase Liabilities and increase Expense: This is possible as well. When a company incurs an expense, it may increase its liabilities if the expense is not paid off immediately.
Similar Questions
The following are three business transactions. For each column, indicate whether the transactions increased, decreased, or had no effect on assets, liabilities, and stockholders’ equity.AssetsLiabilitiesStockholders’ Equity(a)Purchased supplies on account.Select an option Select an option Select an option (b)Received cash for performing a service.Select an option Select an option Select an option (c)Paid expenses in cash.
The payment of a liability decreases both assets and liabilitiesGroup of answer choicesTrueFalse
A business invests in its employees by paying for their education and training in the current year. As a result of this transaction:Group of answer choicesthe business will report increased expenses and decreased assets.the business will report increased expenses and increased assets.the business will report increased revenues and increased assets.the total assets will remain unchanged.
An accounting transaction simultaneously decreases assets and equity. This transaction is explained by which of the following scenarios:Group of answer choicesAn asset was purchased with cash.Accounts Payable owed were paid with cash.An expense was incurred on credit.The owner withdrew cash from the business.Next
The cash payment of a liability: Group of answer choices decreases assets and equity. increases assets and decreases liabilities. decreases assets and increases liabilities. decreases assets and liabilities.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.