A company: Issued common stock for cash. Purchased equipment by signing a note payable. Paid rent for the current month. Collected cash from customers on account. How many of these four transactions increased the given company's total assets A)One. B)Four. C)Two. D)Three.

C)Two

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

Assets = Liabilities + Equity

While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

Examining these transactions;

Issued common stock for cash -  This increases asset (cash) and increases  equity as well.

Purchased equipment by signing a note payable - This increases assets (equipment) and increase liability

Paid rent for the current month - This reduces assets (cash) and reduces equity.

Collected cash from customers on account - This does not increase asset as asset increases (cash) and decreases (accounts receivable) simultaneously.

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