A business owner introduces cash into the business as additional investment. Which effect is recorded?
Correct answer: D. Assets and equity increase
- A. Assets and expenses increase
- B. Assets and liabilities increase
- C. Liabilities and equity increase
- D. Assets and equity increase
Explanation
The cash received becomes a business asset, while the owner's claim on the business increases as equity. No liability or expense arises from the owner's investment.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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