Question

If the total liabilities of a business decrease by Rs 5000 what will be the effect on total assets? (assuming the amount of capital remain same).

• A. Increase by Rs 10,000
• B. Decrease by Rs 10,000
• C. Decrease by Rs 5,000
• D. None of the above

Answer 1

The correct option is C

Decrease by Rs 5,000

Since the capital remains same, a decrease in liabilities will result in an equal decrease in assets i.e. Rs 5,000.