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Preparing Financial Statements of NPO-I

If during the...

Question

If during the accounting period the assets increased by Rs 7,000, and the owner's equity decreased by Rs 3,000, then the liabilities must have ________.

A

increased by Rs 10,000

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B

increased by Rs 4,000

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C

decreased by Rs 4,000

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D

decreased by Rs 10,000

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Solution

The correct option is A increased by Rs 10,000
Accounting Equation is represented as:

Owner's Equity+Liabilities= Assets

Say
10000+8000=18000
If assets increases by Rs.7000 and owner Equity decreases by Rs.3000, than

Rs.7000+Liabilities = Rs.25000
Therefore Liabilities =Rs.18000
Old balance of liabilities =Rs.8000
Hence, liabilities will increase by Rs.10000

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