An owner introduces a personal computer worth Rs. 70,000 into the business. What is the effect on the accounts?
Correct answer: D. Asset increases and capital increases
- A. Liability increases and sales increase
- B. Asset increases and sales increase
- C. Expense increases and capital decreases
- D. Asset increases and capital increases
Explanation
An asset brought into the business by the owner is treated as additional capital. It increases both business assets and the owner's capital, but it is not business revenue.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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