Which transaction directly increases asset accounts?

Which transaction directly increases asset accounts?

• A. Depreciation
• B. Accrued Employee Vacation Payable
• C. Inventory
• D. Sales transactions

Answer: (C)

Asset accounts rise when the business acquires or gains control of resources with future benefits. Purchasing more inventory is the clearest way to directly boost the asset side, because you debit the Inventory account to reflect the extra goods you now own. If you pay cash, another asset (Cash) would fall, but the net change includes an increase in Inventory, which is the direct asset increase. Depreciation, on the other hand, doesn't increase assets; it uses a depreciation expense and increases accumulated depreciation, a contra-asset that lowers net assets. An accrued vacation payable creates a liability, not an asset. Sales transactions can increase assets (cash or accounts receivable) but they also involve other accounts and can affect inventory as well (especially under cost of goods sold), so they aren’t a straightforward direct increase of asset accounts.

Asset accounts rise when the business acquires or gains control of resources with future benefits. Purchasing more inventory is the clearest way to directly boost the asset side, because you debit the Inventory account to reflect the extra goods you now own. If you pay cash, another asset (Cash) would fall, but the net change includes an increase in Inventory, which is the direct asset increase.

Depreciation, on the other hand, doesn't increase assets; it uses a depreciation expense and increases accumulated depreciation, a contra-asset that lowers net assets. An accrued vacation payable creates a liability, not an asset. Sales transactions can increase assets (cash or accounts receivable) but they also involve other accounts and can affect inventory as well (especially under cost of goods sold), so they aren’t a straightforward direct increase of asset accounts.