At the start of a month, a retailer paid $5,000 in cash for candies. He sold $2,000 worth of candies for $3,000 during the month. The most likely effect of these transactions on the retailer's accounting equation for the month is that assets will:
Buying $5,000 of candies will decrease cash by $5,000 and increase inventory by $5,000. Selling $2,000 of candies for $3,000 will decrease inventory by $2,000 and increase either cash (if cash is collected in the same accounting period) or accounts receivable (if sold on credit) by $3,000. The combined effect is an increase of $1,000 in assets.