Which transaction decreases one asset and increases another asset by the same amount?

Which transaction decreases one asset and increases another asset by the same amount?

• A. Purchasing property and equipment with credit
• B. Purchasing property and equipment with cash
• C. Selling property and equipment for cash
• D. Depreciating property and equipment

Answer: (B)

The key idea is an asset-to-asset swap: one asset decreases while another asset increases by the same amount, with no net change in total assets or in liabilities/equity. Buying property and equipment with cash does exactly this. Cash (an asset) goes down, and property and equipment (another asset) goes up by the same amount, so total assets remain unchanged. There’s no effect on liabilities or equity. Buying with credit doesn’t fit because it increases both an asset (PPE) and a liability, so total assets don’t stay the same. Depreciation isn’t an asset swap either—it decreases an asset (PPE) and increases a contra-asset (accumulated depreciation), not another asset. Selling PPE for cash does swap assets as well, but the scenario here is the cash-outflow to acquire a new asset, which is the classic example of this kind of swap.

The key idea is an asset-to-asset swap: one asset decreases while another asset increases by the same amount, with no net change in total assets or in liabilities/equity.

Buying property and equipment with cash does exactly this. Cash (an asset) goes down, and property and equipment (another asset) goes up by the same amount, so total assets remain unchanged. There’s no effect on liabilities or equity.

Buying with credit doesn’t fit because it increases both an asset (PPE) and a liability, so total assets don’t stay the same. Depreciation isn’t an asset swap either—it decreases an asset (PPE) and increases a contra-asset (accumulated depreciation), not another asset. Selling PPE for cash does swap assets as well, but the scenario here is the cash-outflow to acquire a new asset, which is the classic example of this kind of swap.