Increase in the value of Assets Rs.1,00,000 Decrease in the value of Liabilities Rs.50,000.Then owner's equity willa)Increase by Rs.1,50,000b)Increase by Rs.50,000c)Decrease by Rs.1,50,000d)Decrease by Rs.50,000Correct answer is option 'A'. Can you explain this answer?

Question

Answer

Increase in value of assets and decrease in value of liabilities both have a positive impact on the owner's equity of a business. Let's understand how the increase in value of assets and decrease in value of liabilities affect the owner's equity:

1. Increase in the value of Assets

When the value of assets increases, the owner's equity also increases as it shows that the business has more resources to generate revenue and profits. An increase in assets can result from various activities like selling products or services, investing in new equipment, or receiving payments from debtors.

In this case, the value of assets has increased by Rs.1,00,000. Therefore, the owner's equity will increase by the same amount.

2. Decrease in the value of Liabilities

When the value of liabilities decreases, the owner's equity also increases. Liabilities are the debts or obligations that a business owes to its creditors. A decrease in liabilities can result from activities like paying off debts or negotiating better terms with creditors.

In this case, the value of liabilities has decreased by Rs.50,000. Therefore, the owner's equity will increase by the same amount.

Conclusion

The increase in the value of assets and decrease in the value of liabilities both have a positive impact on the owner's equity. In this case, the value of assets has increased by Rs.1,00,000 and the value of liabilities has decreased by Rs.50,000. Therefore, the owner's equity will increase by Rs.1,50,000 (Rs.1,00,000 + Rs.50,000). Thus, the correct answer is option 'A'.

Answer

If assets 1,00,000if liabilities 50,000then, owners equity is 1,00,000+50,000 =1,50,000 increases

Answer

Increase in value of assets is Rs. 1,00,000 and decrease in value of liabilities is Rs. 50,000 that means ki assets increase hue mtlb equity badi 1 lakh se or liabilities km hue 50,000 se iska mtlb liabilities ka balance 50,000 se kam ho gya ya fir ye khe skte hai ki assets ka balance 50,000 badh gya liabilities kam hone ki vjh se. Is hisab se total owners equity Rs1,50,000 hogi (total of increase in assets and decrease in liabilities) hope this helps.

Answer

Decrease by Rachel. 150000

Answer

Let us assume that Assets=Rs. 100000 and claim on that assets by owner(capital) and outsiders(liabilities) be capital=Rs.50000 and liabilities=Rs.50000

we know that,

by using accounting equation i.e Assets=owner's equity (capital)+ liabilities

putting the respective value in it we get,

Assets= capital+liabilites

or, 100000= 50000+ 50000

according to the question,

there is increase in the value of assets by rs.100000

then it becomes like this

100000+100000=50000+100000(this 100000 is increased due to double entry system i.e claim of owner increases by rs.100000)+ 50000

or, 200000=150000+50000

again there is decrease in liability by rs. 50000 then it becomes like this,

200000-50000(this is due to the double-entry system, here claim of outsiders on assets decreases)= 150000+50000-50000

or, 150000=150000+0 (now we can say liability is Nil i.e 0 (zero)

now compared with the equation assets=capital+ liabilities

we get,

Assets=Rs. 150000.

capital (owner's equity)=Rs. 150000.

Hence proved and derived.

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