Question

Give one example of an accounting transaction that will

(i) Increase an asset and increase capital.
Increase an asset and Increase a liability.
(iii) Increase an asset and Increase revenue.
(iv) Decrease an asset and increase expense.
Decrease an asset and Decrease a liability.
(vi) Decrease an asset and Decrease capital.​

Answer 1

Explanation:

(i) 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.

(ii) 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.

(iv) An example is a cash equipment purchase. The equipment account will increase and the cash account will decrease. Equipment is increased with a debit and cash is decreased with a credit.

(v) 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.

(vi) For example, Cash withdrawn by proprietor-Decrease in cash and decrease in capital.