Question

Investment in business by owner results in _______________.

• A. increase in equity
• B. decrease in liabilities
• C. increase in income
• D. decrease in assets

Answer 1

Answer: (A)

increase in equity

Any contribution made by the owner in the business is recorded as capital and to be shown as liability in the books of account of the business.

Owners equity is defined as capital plus reserves & surpluses.

If further capital is introduced , this will increase the owners equity.

Accounting entry will be as under:

Cash/Bank A/c Dr.

To Capital A/c