The company purchases land by paying half in cash and signing a note payable for the other half. What shall be the effect?

Assets - Increase
Liabilities - No effect
Capital - Increase

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Assets - Increase
Liabilities - Increase
Capital - No effect

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Assets - No effect
Liabilities - Increase
Capital - Increase

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Assets - Decrease
Liabilities - No effect
Capital - Decrease

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Solution

The correct option is B
Assets - Increase
Liabilities - Increase
Capital - No effect

Equation element(s) impacted as a result of transaction : “Assets” & “Liability”. The cost of land purchased is an asset of the business, cash paid shall decrease the assets but cost of land shall increase it & at the same time, the note payable shall be a liability to be paid.

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Similar questions

Give an example for each of the following types of transaction.
(i) Increase in one asset, decrease in another asset.
(ii) Increase in asset, increase in liability.
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
(v) Decrease in asset, decrease in owner's capital.
(vi) Decrease in liabilities, increase in owner's capital.
(vii) Increase in one liability, decrease in another liability.
(viii) Increase in liabilities, decrease in owner's capital.

Q. Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.

Which among the following statement(s) is/ are correct?

Codes :

1 only
3 only
1 and 2 only
2 and 3 only

Which statement shows the increase and decrease in various assets, liabilities and capital in two or more balance sheets of the same business enterprise on different dates?

If liabilities increase by 3,000 and equity increases by 2,000, what is the effect on assets?

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