Only one of the following statements correctly describes the effect of a transaction on the financial statements. Which​ one?         A. The purchase of a motor van for £​10,000 cash will increase the assets​ (motor van) by £​10,000 and decrease equity by £​10,000   B. A debtor who pays an amount owed £​1,000 will result in an increase in sales by £​1,000 and an increase in cash by £​1,000   C. Goods purchased on credit £​2,000 will increase inventories by £​2,000 and increase trade payables by £​2,000   D. The payment of a trade payable by £​3,000 will decrease the claims​ (payables) by £​3,000 and decrease equity by £​3,000

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is