[Solved] Which of the following transaction result in increase of ass (2024)

FAQs

Which of the following transactions will result in increase in asset and increase in liability? ›

Answer and Explanation:

Borrowing money from bank will include a debit to cash and credit to loan payable. Thus, the cash account will increase total assets while the loan payable account will increase the total liabilities.

Owner's equity may increase from selling shares of stock, raising the company's revenues and decreasing its operating expenses.

Revenues increase owner's equity and expenses decrease owner's equity. An owner can make a withdrawal of cash or other assets from the business assets if revenue is earned. A withdrawal has the opposite effect on owner's equity than investments: Withdrawals decrease assets and owner's equity.

These transactions include collecting receivables, purchasing inventory on cash, and payment for prepaid insurance, among others.

Transactions that increase liabilities are referred to as the incurrence of a liability. Transactions that decrease liabilities are variously titled repayments, reductions, withdrawals, redemptions, liquidations, or extinguishments.

Liabilities are increased when the company brought goods on account and received payment in advance. On the other hand, it is often decreased by payment of debts. Equity is increased by additional investments, income, and gains. It is usually decreased by withdrawals, expenses, and losses.

Any change in the Common Stock, Retained Earnings, or Cash Dividends accounts affects total stockholders' equity. Stockholders' equity increases due to additional stock investments or additional net income. It decreases due to a net loss or dividend payouts.

Owner's equity is listed on a company's balance sheet. Owner's equity grows when an owner increases their investment or the company increases its profits. A negative owner's equity often shows that a company has more liabilities than assets and can signify trouble for a business.

Answer and Explanation:

a) Performing a service on account for a customer would increase an asset and increase stockholders' equity. The performance of a service increased revenues that are closed into equity at closing and increasing its balance.

When Owner is bringing capital, it increases owners equity along with the cash or bank balance. Hence both assets and owners equity increases.

Which transaction affects the owner's equity? ›

Three transactions that affect owners' equity are receiving cash on account, paying expenses, and paying for supplies bought on account.

(i) Increase in Asset, Increase in Owner's Equity: Introduction of capital by the proprietor increases asset (cash or bank) and also liability (capital). (ii) Decrease in Owner's Capital, Decrease in Asset: Drawings by the proprietor decreases liability (capital) and also asset (cash/bank) etc.

In simple terms, owner's equity is defined as the amount of money invested by the owner in the business minus any money taken out by the owner of the business. For example: If a real estate project is valued at $500,000 and the loan amount due is $400,000, the amount of owner's equity, in this case, is $100,000.

For example, a debit increases asset accounts but decreases liability and equity accounts, which supports the general accounting equation of Assets = Liabilities + Equity. On the income statement, debits increase the balances in expense and loss accounts, while credits decrease their balances.

(A) Introduction of Capital by the Owner: This will increase the asset side of the balance sheet by increasing cash or bank account, and will also increase capital account on the liability side of the balance sheet.

+ + Rules of Debits and Credits: Assets are increased by debits and decreased by credits. Liabilities are increased by credits and decreased by debits. Equity accounts are increased by credits and decreased by debits. Revenues are increased by credits and decreased by debits.

For instance, if a business takes a loan from a bank, the borrowed money will be reflected in its balance sheet as both an increase in the company's assets and an increase in its loan liability.

For example, when a company borrows money from a bank, the company's assets will increase and its liabilities will increase by the same amount. When a company purchases inventory for cash, one asset will increase and one asset will decrease. 2)Sale of goods for cash. Increase in cash and decrease in goods.

Answer and Explanation:

Therefore, both assets and liabilities would increase if company purchases supplies on account. Hence, it is a correct option.