What happens if an individual asset is increased?

An elimination of liability

A decrease in revenue

A reduction of salaries

An increase in the stockholder's equity

1 answer

When an individual asset is increased, the direct impact on the accounting equation (Assets = Liabilities + Stockholders' Equity) is that it represents an increase in the total assets of the company. This could result in various scenarios depending on how the asset was acquired.

  1. An elimination of liability - This is not necessarily true. Increasing an asset does not automatically eliminate a liability unless the asset is acquired through paying off that liability.

  2. A decrease in revenue - This is not directly related. An increase in an asset does not imply a decrease in revenue; it could increase revenue if the asset generates income.

  3. A reduction of salaries - Increasing an asset does not inherently affect salary expenses. This statement is not accurate in this context.

  4. An increase in stockholder's equity - This is not true by default. While an increase in assets can contribute to an increase in stockholders' equity in the long term if the asset generates profits, it does not directly increase stockholders' equity in the short term.

In summary, among the options provided, none directly correlate with a true or automatic relationship with an increase in asset value. The most relevant point here is that increasing an asset does not result in immediate elimination of liabilities, reduction of revenue, or changes in expenses unless those transactions explicitly occur.