If the owner of a business use his own money to buy supplies, is it an owner's equity or asset? Liabilities are given, and it is required to identify what is missing in such transaction.
Answer (1)
Answer:When the owner uses their own money to buy supplies for the business, it would be considered an owner's equity investment. Liabilities represent the obligations of the business to external parties, such as loans or accounts payable. In this transaction, the owner is using their own personal funds, which are not a liability of the business. Therefore, what is missing in this transaction is the recognition of an increase in assets. When the owner purchases supplies with their own money, the supplies purchased would be considered an asset of the business. Thus, the transaction should be recorded as an increase in assets (supplies) and an increase in owner's equity.
