In a journal entry that increases the Equipment account and decreases the Cash account, which descriptions correctly reflect the changes?

In a journal entry that increases the Equipment account and decreases the Cash account, which descriptions correctly reflect the changes?

• A. decrease, increase
• B. increase, increase
• C. decrease, decrease
• D. increase, decrease

Answer: (D)

When you acquire equipment using cash, one asset goes up and another goes down. Equipment is increasing, while Cash is decreasing because you’re paying out cash to obtain the equipment. So the correct description is that Equipment increases and Cash decreases. This reflects the swap of one asset for another, and in double-entry terms you’d debit Equipment (increase) and credit Cash (decrease). The other descriptions would imply the assets are both rising or both falling, which doesn’t match paying cash for equipment.

When you acquire equipment using cash, one asset goes up and another goes down. Equipment is increasing, while Cash is decreasing because you’re paying out cash to obtain the equipment. So the correct description is that Equipment increases and Cash decreases. This reflects the swap of one asset for another, and in double-entry terms you’d debit Equipment (increase) and credit Cash (decrease). The other descriptions would imply the assets are both rising or both falling, which doesn’t match paying cash for equipment.