Which Statement Is Correct Regarding Entering Transactions Into The Accounting Equation?
The option (A) is wrong, as if one account is credited then other must be debited, otherwise, it goes against the fundamental principles of dual aspect accounting concept. This is not possible in Double Entry System.
The choice (B) is also not correct as when assets are increased, only liabilities are increased. This is not always the case i.e., when cash is invested into the business, ownerās equity and cash are also increased. The journal entry to record is to debit cash account and credit ownerās equity. Also, in case of additional investment made, then cash increased on debit side and ownerā s equity also increased on credit side of the accounting equation.
The option no. (C) is also incorrect as when one asset account is increased, then there are possibilities that ownerās equity or liabilities increased on credit side such as in case of initial investment made into the business or when and bank loan is taken then cash account is increased on debit side and bank loan account (liabilities) is increased on credit side.
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