Question

Give one example of transaction that result in decrease in liabilities and increase in capital

Answer 1

Creditor a/c. Dr. 1000

To discount a/c. 100

To bank a/c. 900

(Being discount allowed by creditor)

Answer 2

Answer:

There are number of examples in which one liability account increases and other decreases. For example: a creditor to whom we owed some money, we issued a promissory note to him, thus creditor's account will decrease and accounts payable account will increase.Increase in liabilities, decrease in owner's capital. Solution : 1. Purohase of furniture for cash-Increase in furniture and decrease in cash.