All business transactions can be stated in terms of a. changes in cash. b. changes in owner's equity. c. changes in the elements of the accounting equation. d. None of these choices are correct.

Question

Business

Cherish Duarte

28 September, 10:10

All business transactions can be stated in terms of a. changes in cash. b. changes in owner's equity. c. changes in the elements of the accounting equation. d. None of these choices are correct.

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Answers (1)

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Ryland Kirby · Answer 1

c. changes in the elements of the accounting equation.

Explanation:

Accounts have a standard equation, where

Assets = Liabilities + Stockholder's Equity

Whenever, there is an accounting transaction that transaction must be represented in numerical values, but it is not necessary that the transactions shall have a cash effect.

As for example, sale of products on credit will not involve cash.

An acquisition of fixed asset on credit will not impact the owner's equity, as with increase in asset there is equal increase in liability and accordingly, no change in owner's equity.

There is always a change in elements of accounting equation.

As for sale on credit there will be a change in assets in the form of receivables and change in stockholder's equity as increase in revenue would lead to increase in retained earnings.

Therefore, Statement C is correct

c. changes in the elements of the accounting equation.