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Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:
- a)Total assets increase by Rs. 10,000
- b)Total liabilities increase by Rs. 3,000
- c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000
- d)Both (b) and (c)
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance ...
Explanation:
When Ram purchased a car for Rs. 10,000 and paid Rs. 3,000 as cash, the balance amount of Rs. 7,000 will be paid in three equal installments. Let's understand how this transaction affects the accounting equation.
Assets = Liabilities + Owner's Equity
In this case, the car is an asset, and cash is also an asset. The total assets of the business increase by Rs. 10,000, as the business now owns a car worth Rs. 10,000.
a) Total assets increase by Rs. 10,000
Now, let's look at how the liabilities and owner's equity are affected.
Liabilities are the debts or obligations of the business. When Ram purchases a car for Rs. 10,000, he owes the remaining balance of Rs. 7,000 to the seller. This liability will be paid in three equal installments.
b) Total liabilities increase by Rs. 3,000
However, since the balance amount of Rs. 7,000 is to be paid in three equal installments, it means that there will be an increase in liabilities of Rs. 7,000. The liability will increase by Rs. 7,000 because the business is liable to pay the remaining balance in installments.
c) Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000
Therefore, the correct answer is option 'C', as assets will increase by Rs. 7,000 with a corresponding increase in liability by Rs. 7,000.
When Ram purchased a car for Rs. 10,000 and paid Rs. 3,000 as cash, the balance amount of Rs. 7,000 will be paid in three equal installments. Let's understand how this transaction affects the accounting equation.
Assets = Liabilities + Owner's Equity
In this case, the car is an asset, and cash is also an asset. The total assets of the business increase by Rs. 10,000, as the business now owns a car worth Rs. 10,000.
a) Total assets increase by Rs. 10,000
Now, let's look at how the liabilities and owner's equity are affected.
Liabilities are the debts or obligations of the business. When Ram purchases a car for Rs. 10,000, he owes the remaining balance of Rs. 7,000 to the seller. This liability will be paid in three equal installments.
b) Total liabilities increase by Rs. 3,000
However, since the balance amount of Rs. 7,000 is to be paid in three equal installments, it means that there will be an increase in liabilities of Rs. 7,000. The liability will increase by Rs. 7,000 because the business is liable to pay the remaining balance in installments.
c) Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000
Therefore, the correct answer is option 'C', as assets will increase by Rs. 7,000 with a corresponding increase in liability by Rs. 7,000.
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Community Answer
Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance ...
(Assets) 3000 will be deducted from cash and 10000 will be added to car's a/c=(liability) 7000 will be added to creditors.
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Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer?
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Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer?.
Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer?.
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ample number of questions to practice Ram purchased a car for Rs. 10,000 paid Rs. 3,000 as cash and balance amount will be paid in three equal installments. Due to this:a)Total assets increase by Rs. 10,000b)Total liabilities increase by Rs. 3,000c)Assets will increase by Rs. 7,000 with corresponding increase in liability by Rs. 7,000d)Both (b) and (c)Correct answer is option 'C'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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