Question

Company x receives $10,000 from issuing common stock to its owners. the effect on the accounting equation is a(n) _____. (check all that apply.)

Answer 1

The effect on the accounting equation is a(n): increase in assets and equity by $10,000 each

What is accounting equation?

The accounting equation shows that all assets of a company are financed by combination of equity of the owners(an increase in equity of $10,000 in this case) and the liabilities, which are funds provided by external financiers.

In this case, the receipt of $10,000 from common stock issuance means that the cash balance, which is an asset has increased by $10,000, also, the equity of the owners has also increased by the same amount.

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