A company purchased inventory worth Rs. 50,000 on credit. What will be the effect on the accounting equation?

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Liabilities will increase and Owner's Equity will decrease.

Assets and Liabilities will increase.

Assets and Owner's Equity will increase.

Assets will increase and Owner's Equity will decrease.

answer is C.

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Detailed Solution

The purchase of inventory will increase the asset account (inventory) and the liability account (accounts payable). Therefore, both assets and owner's equity will increase.

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