If a fraudster misappropriates cash, which method would NOT maintain the accounting equation?

The method that would not maintain the accounting equation involves the act of misappropriating cash without properly balancing the effects on the accounting records. The accounting equation states that Assets = Liabilities + Owner's Equity.

When a fraudster misappropriates cash and decreases another asset, the equation remains balanced because both assets are reduced, leaving the overall assets side unchanged. This means that the equation still holds true as the total assets decrease equally with another asset.

In contrast, creating an expense increases the expense accounts, which ultimately reduces owners' equity, thus keeping the accounting equation in balance. Reducing owners' equity directly affects the equation through the established relationship of assets and liabilities. Likewise, decreasing a liability also keeps the equation balanced, as it reduces the obligations the entity has, allowing the assets to remain proportionate.

Therefore, the option that does not maintain the accounting equation is the act of decreasing another asset because when cash is misappropriated, the proper accounting treatment should reflect a full offsetting transaction or a genuine business activity that accommodates the missing funds. In this scenario, simply decreasing cash without an appropriate action elsewhere violates the integrity of the accounting equation.