Paul Invested Cash In His New Business. What Effect Will This Have? | MCQ Answer

The correct answer is (C), as cash invested into the business increased the asset side of Accounting Equation as Cash is coming into the business and also increased the Capital (money invested into the business), which ultimately increased the Owner’s Equity on the right side of accounting equation as the rights of owner of the business against assets of the business are also increased.’’

When the owner (Paul) invested Cash $1000 in his business, then following Journal Entry is recorded as shown below:

                                                               Cash a/c $1000

 

                                                                                 Capital a/c  $1000

                                                           (Cash Invested Into The Business)

                                        Assets  =   Liabilities   +  Owner's Equity

                                           +Cash    =             -            +        +Capital

                                           +$1000  =            -             +         +$1000