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What is the best way to utilize borrowed money to purchase assets that will increase wealth, rather than liabilities that will decrease it?
The best way to use borrowed money to increase wealth is to invest in assets that have the potential to grow in value over time, such as real estate, stocks, or a business. Avoid using borrowed money to purchase liabilities like cars or luxury items that do not generate income or appreciate in value.
What else can I help you with?
What happens to liabilities in an asset purchase?
In an asset purchase, liabilities are typically not transferred to the buyer. The buyer only acquires the specific assets agreed upon, and the seller remains responsible for any existing liabilities.
The purchase of office equipment on an account would increase assets and decrease liablities?
it depends...are you replacing old equipment? if so then no if by equipment you mean chairs etc.
What is the highest percentage of individual or family income that can be borrowed for a home purchase?
30%
What are the risks associated with buying liabilities?
The risks associated with buying liabilities include potential financial losses, legal obligations, and negative impacts on creditworthiness. Liabilities can lead to debt accumulation, interest payments, and potential default if not managed properly. It is important to carefully assess and understand the liabilities before making a purchase to mitigate these risks.
Can a credit card loan spent to purchase a home be tax deductible?
No. Money, borrowed or not, to purchase a home is not tax deductible...the interest on the mortgage secured to the property may be.
If a company purchase equipment on account will the assets increase decrease or stay the same?
If the equipment is purchased on credit (on account) then the net assets will stay the same as the assets will increase by the same amount as the liabilities
In the buyers records the purchase of merchandise on account would it increase or decrease assets expenses liabilities?
Anything bought on account will have an impact on two sides of the accounting equation. Since we "purchased" the merchandise we are receiving, therefore we will Increase our assets (merchandise), since we purchased this item on "account" we will also increase our liabilities (account payable).
What are the effects on the accounting equation from the purchase of a short-term investment?
The purchase of a short-term investment typically results in an increase in assets (cash decreases, and the investment account increases). The accounting equation remains balanced as the decrease in cash is offset by the increase in the investment account, maintaining the equality of assets, liabilities, and equity.
What effect does the purchase of treasury stock have on total stockholders equity increase decrease or none stays the same?
decrease
What is the difference between accounts payable and notes payable?
Accounts payable refers to liabilities owed to creditors from whom you've made a purchase. Notes payable refer to liabilities owed to investors from whom you've borrowed money by issuing a debt security.
Computer purchase for personal use from hcl what journal entries for this?
When purchasing a computer for personal use from HCL, you would typically debit the Computer (asset) account for the cost of the computer purchased and credit the Cash (or Bank) account if paid in cash, or the Accounts Payable account if purchased on credit. This reflects the increase in assets with the purchase of the computer and the corresponding decrease in cash or increase in liabilities.
What will increase one asset and decrease another asset without affecting liabilities or owner's equity?
Many cash transactions result in changes between asset accounts, such as the receipt of an accounts receivable, the outright purchase of an asset or the payment of a pre-paid expense.
Why do credits increase liabilities and equity and decrease assets?
This is simply the fundamental part of double-entry accounting.If we view the balance sheet as two sides, the left side contains all of a company's assets, while the right side contains all of the company's liabilities, as well as shareholders' equity/share capital and retained earnings.An increase to the left side is a Debit, and a decrease is a Credit.An increase to the right side is a Credit, while a decrease is a Debit.If we were to purchase a building (part of Property, Plant & Equipment) with cash, our entry would be:Debit PP&E (building)Credit CashBecause these are both asset accounts (left-side accounts), an increase to PP&E by buying the building is a Debit, and a decrease to to Cash buy using it to purchase the building is a Credit.If we were to purchase the building, but instead of paying cash we negotiated with the seller and they accepted that we will pay them at a later date, the entry would be:Debit PP&E (building)Credit Accounts payableThe Debit entry is the same, while the increase in A/P (right-side account) is a credit because it is an increase in a liability account.
Do liability accounts increase on the credit side?
Yes, liabilities maintain a "credit" balance, which means they will increase with a credit and decrease with a debit. For example, if you purchase land on credit, the Note Payable is a liability and is increased with the credit. The book transaction may look something like:Land (debit) $50,000Note Payable - Land (credit) $50,000
Will a credit always decrease a cash account?
A cash account will always be decreased by a credit, but a credit will not always decrease a cash account. The only time a credit decreases cash is when the company pays out cash, whether it's to purchase supplies, inventory, or pay wages etc. Here is two examples of a credit in a transaction, one will decrease cash, the other will not. Company X buys $1,000 in inventory from Company Y and pays CASH. The debit for this transaction will increase inventory, the credit will decrease cash since company X is paying cash for this transaction. Using the same transaction however, changing Company X wants to purchase this inventory on "credit" the debit in this transaction as above will still increase inventory, however, since Company X has chosen to purchase this inventory on credit and not use cash and accounts payable will be set up and the credit will "increase" accounts payable. Remember, Assets will "always" increase with a debit and decrease with a credit. Liabilities will "always" decrease with a debit and increase with a credit.
How does purchases on account affect the balance sheet?
Purchases on account increases both Assets and Liabilities. Since a purchase on account becomes and account payable it is a liability account and the company's liabilities will increase the amount of the purchase. More than likely the purchase is for some type of equipment or supplies the company needs to operate and therefore is an asset to the company and that asset will increase by the same amount. Let's say Company X purchases $5,000 in supplies from company Z on account, Company X will record the transaction as follows. Supplies (dr) $5,000 Acc.Pay. Comp. Z (cr) $5,000 Remember Assets = Liabilities + Equity Assets increase with a debit Liabilities and Equity increase with a credit.
Open market purchase will result in?
increase in bank reserves and a decrease in the federal funds rate
