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.
Question
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.
Solution 1
When a business invests in its employees by paying for their education and training, it is essentially spending money to improve its workforce. This is considered an expense. Therefore, the business will report increased expenses.
However, this does not necessarily mean that the business's assets will decrease. Assets are resources owned by a business that can be used to generate future economic benefits. While the business is spending money (an asset) on education and training, it is also creating a more skilled and potentially more productive workforce, which could be considered an intangible asset.
Therefore, the correct answer is: the business will report increased expenses and increased assets.
Solution 2
The correct answer is: the business will report increased expenses and decreased assets.
Here's why:
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When a business pays for employee education and training, it is considered an expense. This is because the company is using its resources (money) to improve the skills and knowledge of its employees. This will be recorded as an increase in the company's expenses.
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The payment for education and training will decrease the company's assets because it is using its cash (an asset) to pay for these expenses. Once the cash is used, it is no longer an asset of the company.
Therefore, as a result of this transaction, the business will report increased expenses and decreased assets.
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