If a company purchases equipment costing $5,800 on credit, the effect on the accounting equation would be

If a company purchases equipment costing $5,800 on credit, the effect on the accounting equation would be assets would increase by $5,800 and liabilities would increase by $5,800. When you purchase a new piece of equipment it becomes an asset because it is something you own that provides benefits. Due to purchasing the item on credit, it would also fall under a liability because it is money you have to pay back, similar to an IOU.