Asked by Julian Cintron on Apr 29, 2024
Verified
The following entry was recorded in the books of Brighty Company.Mar. 31 Cost of Goods Sold
18,000
Inventory
18,000
Recorded cost of goods sold.
What is the impact of this entry on the accounting equation?
A) an increase in Assets and an increase in Equity
B) an increase in Assets and an increase in Liabilities
C) a decrease in Assets and a decrease in Liabilities
D) a decrease in Assets and a decrease in Equity
Cost of Goods Sold
Cost of Goods Sold (COGS) measures the direct costs associated with producing goods that a company sells during a period, including materials and labor.
Accounting Equation
The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Equity, representing the relationship between a company's resources and claims on those resources.
Inventory
The total amount of goods and materials held by a company intended for sale or used in producing goods for sale.
- Scrutinize and record activities altering the accounting equation.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
D
Explanation :
This journal entry reflects a decrease in assets (Inventory) and a decrease in equity (through Cost of Goods Sold, which reduces net income and therefore retained earnings, a component of equity).
Learning Objectives
- Scrutinize and record activities altering the accounting equation.