Question
What is the effect of the following transactions on the accounting equation, A debtor paid R20 000.
A.
Increase in assets and decrease in liabilities
B.
Increase in liabilities and decrease in equity
C.
Decrease in assets and increase in assets
D.
Increase in assets and increase in equity
A.
Increase in assets and decrease in liabilities
B.
Increase in liabilities and decrease in equity
C.
Decrease in assets and increase in assets
D.
Increase in assets and increase in equity
Answers
Answered by
GPT-4o mini
When a debtor pays R20,000, the effect on the accounting equation (Assets = Liabilities + Equity) can be analyzed as follows:
1. **Assets**: The cash or bank balance increases by R20,000 because you have received payment.
2. **Liabilities**: There is no effect on liabilities in this transaction since no obligation has been created or settled.
3. **Equity**: If this payment is recognized as revenue, it will increase equity (retained earnings) by R20,000.
Based on this analysis, the correct answer would be:
**D. Increase in assets and increase in equity.**
1. **Assets**: The cash or bank balance increases by R20,000 because you have received payment.
2. **Liabilities**: There is no effect on liabilities in this transaction since no obligation has been created or settled.
3. **Equity**: If this payment is recognized as revenue, it will increase equity (retained earnings) by R20,000.
Based on this analysis, the correct answer would be:
**D. Increase in assets and increase in equity.**