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Purchase of machinery for cash
  • a)
    Decreases total assets.
  • b)
    Increases total assets.
  • c)
    Retains total assets unchanged.
  • d)
    Decreases total liabilities.
Correct answer is 'C'. Can you explain this answer?
Verified Answer
Purchase of machinery for casha)Decreases total assets.b)Increases tot...
Purchase of Machinery. This transaction will give affect in two accounts i.e. Machinery Account and cash Account.
Hence there will be no affect in total assets as Machinery will increase and cash will decrease.
Yes, there will be a change in fixed assets and current assets. But total assets will remain unchanged.
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Most Upvoted Answer
Purchase of machinery for casha)Decreases total assets.b)Increases tot...
Explanation:

When a company purchases machinery for cash, the following changes occur in its financial statements:

1. Increase in Machinery: Since the company has purchased machinery, the value of its machinery account will increase. This will increase the total assets of the company.

2. Decrease in Cash: The company paid for the machinery in cash, so the value of its cash account will decrease. This will decrease the total assets of the company.

However, the increase in machinery and the decrease in cash are equal in amount, so the total assets of the company remain unchanged. Therefore, the correct answer is 'C' which states that the purchase of machinery for cash retains total assets unchanged.

Summary:

- Purchase of machinery for cash increases the value of machinery account.
- Purchase of machinery for cash decreases the value of cash account.
- The increase in machinery and decrease in cash are equal in amount.
- As a result, the total assets of the company remain unchanged.
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Community Answer
Purchase of machinery for casha)Decreases total assets.b)Increases tot...
As cash is also an asset... .. so as the cash decreases but at the same time an assest worth same is purchased so purchase of machinery for cash retains total assets unchanged
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Purchase of machinery for casha)Decreases total assets.b)Increases total assets.c)Retains total assets unchanged.d)Decreases total liabilities.Correct answer is 'C'. Can you explain this answer?
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