Question

Assets and equity of owner are capital increase :
(A) By drawings of owner
(B) By profit
(C) By purchase of building on credit
(D) None of these​

Answer 1

Answer:

Explanation:

A. Drawings:- This will decrease the Capital account and the equity will decrease. With this total of Balance sheet of Assets side as well as Liabilities side will decrease to the extent.

B. By Profit: With the increase in Profit > the profit figure will add to the Capital as such Capital will increase.  This will add to the Assets & Liabilities side.

C. By purchase of building on credit.  Purchase of building on credit is not connected with Capital account but Building a/c will be debited and supplier's account will be credited which will lead to increase in Building amount and supplier account also.  Means both Assets and Liabilities side will increase.

All above point will clear to the candidate.