Question

point out with justification wether the following statements are true or false.
a)X has assets of 42000 and liabilities of 15000.His capital therefore will be 57000.
b)if a firm borrows a sum of money its capital will reduced.
c)asset will be equal to owner's equity if there are no liabilities in the bussines.

Answer 1

Dear Student,
a. Assets =Liabilities + Capital . It is not satisfied by the given information. So, this is false.
b. False. When we take a loan our cash and liabilities are increased. There will be no change in capital.
c. True. If there is no liability assets will be equal to owners' equity.(Assets =Liabilities + Capital)

Regards