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Standard XII
Fundamentals of Accounting and Auditing
Question

Investment by owner results in ___________________.
  1. Increase in capital and decrease in libility
  2. Increase in capital and increase in liability
  3. Increase in capital and decrease in asset
  4. Increase in capital and increase in asset

A
Increase in capital and decrease in asset
B
Increase in capital and increase in asset
C
Increase in capital and decrease in libility
D
Increase in capital and increase in liability
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Solution
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Owner investment, also called owner's investment or contributed capital, is the amount of assets that the owner puts into the company.

In other words, this is the amount of money or other assets that the owner contributes to the business either to start it or to keep it running.

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Similar Questions
Q1
Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.
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Q2
An example of a Decrease in liabilities and increase in owner's capital is _________.
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Q3

Give an example for each of the following types of transaction.
(i) Increase in one asset, decrease in another asset.
(ii) Increase in asset, increase in liability.
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
(v) Decrease in asset, decrease in owner's capital.
(vi) Decrease in liabilities, increase in owner's capital.
(vii) Increase in one liability, decrease in another liability.
(viii) Increase in liabilities, decrease in owner's capital.

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Q4
With an increase of investment in fixed assets, there is a commensurate ________ in the working capital.
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Q5

What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense, (c) record drawings (d) record the fresh capital introduced by the owner.

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