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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
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Pearl Ltd. Company purchased a van for Rs. 12,000 making a down payment of Rs. 5,000 cash and signing a Rs. 7,000 note payable in 60 days. As a result of this transaction:
(a) Total assets will increase by Rs. 12,000
(b) Total liabilities will increase by Rs. 7,000
(c) This transactions will not have immediate effect on owner's equity in the business
(d) From the point of view of short-term creditor, this transaction will make business more liquid
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Eduncle Best Answer
As company has signed a note payable of Rs.7000 so this will increase the liability by Rs 7000. Also as it is a business transaction so it will not have immediate effect on owner's equity in the business.