When loan of Rs.10,000 is taken the from bank, what will be the impact in accounting equation?

Assets and Capital increases by 10,000

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Assets and Liabilities increases by 10,000

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No Impact

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none of these

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Solution

The correct option is B
Assets and Liabilities increases by 10,000

When loan is taken from the bank, cash of Rs.10,000 is received and an obligation to repay the same to bank arises in the future.

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