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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).


  1. Increase by Rs 10,000

  2. Decrease by Rs 10,000

  3. Decrease by Rs 5,000

  4. None of the above


Solution

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.

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