Stock valued at Rs. $20, 000$ sold for cash at Rs. $24, 000$ would cause ____________________.

decrease in current assets by Rs.

20, 000

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Increase in owners equity and total assets by Rs.

4, 000

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increase in debtors by Rs.

24, 000

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none of these

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Solution

The correct option is B Increase in owners equity and total assets by Rs. $4, 000$
Value of stock = Rs. 20,000; Sale price of stock = Rs. 24,000
therefore gain on sale of stock = Sale price of stock - Value of stock
gain on sale of stock = Rs. 24,000 - Rs. 20,000
gain on sale of stock = Rs. 4,000

Gain on sale of stock will result in increase in the net profit which ultimately increases owner's equity and total assets.

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Similar questions

Q. If the owners equity is Rs.

80, 000

and external liability Rs.

40, 000

, Cash in hand Rs.

20, 000

, the other assets of the firm will be ____________.

Prepare Trail Balance from the following information:

Bank overdraft Rs.28,000,Cash in hand Rs.4,000,Purchase return Rs.8,000,Sundry expenses Rs.24,000,Sales return Rs.16,000,Salaries Rs.16,000,Purchases Rs.56,000,Sales Rs.88,000,Creditors Rs.24,000,Debtors Rs.16,000,Stock (opening) Rs.20,000,Machinery Rs.40,000,Capital Rs.44,000.

Q. If the owner's equity is Rs.