After Rosemary, buys furniture, what happens to her cash balance?

After Rosemary, buys furniture, what happens to her cash balance?

• A. It increases
• B. It decreases
• C. It stays the same
• D. It becomes a liability

Answer: (B)

When Rosemary purchases furniture, her cash balance decreases because she uses cash to make the purchase. The action of buying furniture represents an outflow of cash from her accounts, hence reducing the total cash balance available.

In accounting, this transaction also results in an increase in assets, specifically the value of the furniture. However, the cash balance itself reflects a reduction due to the funds spent on tangible property. This transaction demonstrates the fundamental principle that spending cash decreases the cash account while potentially increasing other asset accounts. The other options suggest scenarios that do not accurately represent the cash outflow that occurs during a purchase, reinforcing that the correct understanding of cash movement in such transactions is crucial for effective bookkeeping.