Which of the following is/are correct regarding the accounting equation? 1. The equation always holds true under the double entry system. 2. Purchase of goods on credit increases assets and liabilities. 3. Payment to creditors decreases assets and increases liabilities. 4. Introduction of capital by the proprietor increases both assets and capital.
Explanation:
Statement 3 is incorrect because payment to creditors decreases both assets (cash/bank) and liabilities (creditors). 1, 2, and 4 are correct.
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