Purchase of office equipment for cash would cause __________.

Cash in hand to decrease

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External liability to decrease

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Total liabilities to increase

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Total assets to increase

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Solution

The correct option is A Cash in hand to decrease
Cash utilized from the business for purchase of equipment will increase the asset base of the firm and reduces the cash in hand. Cash is moving out and assets is coming in the business.

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Q. What journal entry is passed for realising assets to provide cash for payment of liabilities?

Rohit has the following transactions:

		Rs
(a)	Commenced business with cash	1,50,000
(b)	Purchased machinery on credit	40,000
(c)	Purchased goods for cash	20,000
(d)	Purchased car for personal use	80,000
(e)	Paid to creditors in full settlement	38,000
(f)	Sold goods for cash costing Rs 5,000	4,500
(g)	Paid rent	1,000
(h)	Commission received in advance	2,000

Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital.

Every financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total time and demand liabilities. These assets have to be kept in non-cash form such as precious metals, approved securities like bonds etc. The ratio of the liquid assets to time and demand liabilities is termed as _____.

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Purchase of office equipment for cash would cause __________.

The correct option is A Cash in hand to decreaseCash utilized from the business for purchase of equipment will increase the asset base of the firm and reduces the cash in hand. Cash is moving out and assets is coming in the business.

The correct option is A Cash in hand to decrease
Cash utilized from the business for purchase of equipment will increase the asset base of the firm and reduces the cash in hand. Cash is moving out and assets is coming in the business.