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If an individual asset is increased, three will be a corresponding
- a)Increase of another asset or increase of capital.
- b)Decrease of another assets or increase of liability.
- c)Decrease of specific liability or decrease of capital.
- d)Increase of drawings and liability.
Correct answer is option 'B'. Can you explain this answer?
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If an individual asset is increased, three will be a correspondinga)In...
When individual asset is increased some of another asset will be decreased or increase of liability ( because if he/she buy it loan )so the answer is B.
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If an individual asset is increased, three will be a correspondinga)In...
Increase in an Individual Asset and its Corresponding Effect
When an individual asset is increased, it has a corresponding effect on the financial position of the entity. This effect is observed in the balance sheet where all the assets, liabilities, and capital are recorded.
The correct answer to the question is option 'B' - Decrease of another asset or increase of liability.
Explanation:
When an individual asset is increased, there are two possible corresponding effects:
1. Decrease of Another Asset:
When one asset increases, it is possible that another asset decreases. This is because assets are usually interrelated, and an increase in one asset might require a decrease in another. For example, if a company purchases a new piece of machinery, it might need to sell or dispose of an old piece of machinery to make room or generate funds. This results in a decrease in the value of the old machinery and an increase in the value of the new machinery, leading to a net increase in assets.
2. Increase of Liability:
Alternatively, an increase in an individual asset might be financed through a liability. For example, if a company purchases inventory on credit, it increases the value of its inventory asset but also incurs a liability to pay for the inventory in the future. This increase in liability balances out the increase in the asset, maintaining the balance sheet equation (Assets = Liabilities + Capital).
Overall, the corresponding effect of an increase in an individual asset can be a decrease in another asset or an increase in liability. These effects ensure that the balance sheet equation remains in balance. The balance sheet is a snapshot of an entity's financial position at a given point in time and must always adhere to the fundamental accounting equation.
When an individual asset is increased, it has a corresponding effect on the financial position of the entity. This effect is observed in the balance sheet where all the assets, liabilities, and capital are recorded.
The correct answer to the question is option 'B' - Decrease of another asset or increase of liability.
Explanation:
When an individual asset is increased, there are two possible corresponding effects:
1. Decrease of Another Asset:
When one asset increases, it is possible that another asset decreases. This is because assets are usually interrelated, and an increase in one asset might require a decrease in another. For example, if a company purchases a new piece of machinery, it might need to sell or dispose of an old piece of machinery to make room or generate funds. This results in a decrease in the value of the old machinery and an increase in the value of the new machinery, leading to a net increase in assets.
2. Increase of Liability:
Alternatively, an increase in an individual asset might be financed through a liability. For example, if a company purchases inventory on credit, it increases the value of its inventory asset but also incurs a liability to pay for the inventory in the future. This increase in liability balances out the increase in the asset, maintaining the balance sheet equation (Assets = Liabilities + Capital).
Overall, the corresponding effect of an increase in an individual asset can be a decrease in another asset or an increase in liability. These effects ensure that the balance sheet equation remains in balance. The balance sheet is a snapshot of an entity's financial position at a given point in time and must always adhere to the fundamental accounting equation.
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If an individual asset is increased, three will be a correspondinga)Increase of another asset or increase of capital.b)Decrease of another assets or increase of liability.c)Decrease of specific liability or decrease of capital.d)Increase of drawings and liability.Correct answer is option 'B'. Can you explain this answer?
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