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Standard XII
Accountancy
Question

Both assets and owners' equity would be increased by _________.
  1. Payment of creditors
  2. Proprietors drawings
  3. Capital brought in
  4. Purchase of an asset on credit

A
Capital brought in
B
Proprietors drawings
C
Purchase of an asset on credit
D
Payment of creditors
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Solution
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Accounting Equation:

Owners Equity+Liabilities=Fixed Assets+Current Assets

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

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Similar Questions
Q1
Both assets and owners' equity would be increased by _________.
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Q2
Which of the following, equations properly represents a derivation of the fundamental accounting equation?
(a) Assets + Liabilities = Owner Equity
(b) Asset = Owner Equity
(c) Cash = Assets
(d) Assets - Liabilities = Owner Equity
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Q3

Assuming that the Debt-Equity Ratio is 2 : I, state, giving reasons, which of the following transactions would (I) Increase; (ii) Decrease; (ii.) Not alter the Debt-Equity Ratio :

(i) Issue of new shares (Preference/Equity) for Cash.

(ii) Issue of new shares (Preference/Equity) against purchase of fixed asset.

(iii) Buy-back of its own shares by a Company.

(iv) Issue of Debentures for Cash.

(v) Issue of Debentures against purchase of fixed asset.

(vi) Repayment of Long-term Borrowings.

(vii) Conversion of Debentures into Equity Shares/Preference Shares.

(viii) Sale of a fixed asset at par.

(ix) Sale of a fixed asset at profit.

(x) Sale of a fixed asset at loss.

(xi) Purchase of a fixed asset on a credit of 2 months.

(xii) Purchase of a fixed asset on long-term deferred payment basis.

(xiii) Issue of Bonus Shares.

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Q4
Both assets and owner's equity (i.e. capital) would be increased by ___________.
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Q5
Assuming That the Debt to Equity Ratio is 2 : 1, state giving reasons, which of the following transactions would (i) increase; (ii) Decrease; (iii) Not alter Debt to Equity Ratio:

(i) Issue of new shares for cash.
(ii) Conversion of debentures into equity shares
(iii) Sale of a fixed asset at profit.
(iv) Purchase of a fixed asset on long-term deferred payment basis.
(v) Payment to creditors.
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