Question

Better-Cars Selection, a used car dealer, has total assets and liabilities of Rs 50,000 and Rs18,000, respectively. The firm constructed a shelter for its automobiles by promising to pay the building contractor, upon completion of the building, Rs 500 per month for twenty-four months. Upon completion, owner's capital account will:

• A. Increase by Rs 12,000
• B. Remain unchanged
• C. Decrease by Rs 12,000
• D. Increase by Rs 500, each month

Answer 1

The correct option is B

Remain unchanged

The capital remains same, because there is an increase in assets with an increase in liability i.e. Rs 12,000.