An Owner's Investment Of Cash Into The Business Will:| Multiple Choice Question Answer

Solution To The Multiple Choice Question With Example

The correct answer of this multiple choice question (mcq) is (A). Increase Total Assets, as Cash (which is a Current Asset) invested into the business is an inflow of cash for business, so it will increase the total assets of the business.

Example: Mr. A invested cash for $3000 into the business. It is a Business Transaction in which two accounts are involved. Cash Account, which is increasing, while Capital is also increasing which increased the Owner’s Equity on both sides of Accounting Equation as shown below:

                              

                              Assets     =     Liabilities     +     Owner’s Equity
 
                              +Cash     =           ---             +         (+Capital)
 
                             +$3000    =           ---             +          (+$3000)

So, cash increased by $3000 which increased total assets by $3000 on asset side or left side of accounting equation while on the right side of the accounting equation, capital increased by $3000, so it also increased the owner’s equity on liabilities & equity side (right side).