Question

Mary invested cash in her new business. which effect will this have?

Answer 1

The Correct Answer is D) Increase an asset; Increase owners equity

Explanation:

Cash is recorded as a 'Current Asset'. When Mary invested cash in her new business, her 'Current Assets' increased by the amount of cash she invested.

Assets = Liabilities + Equities

In order to balance the above equation, an increase in Assets would result in an increase in the equity with equal proportion.

For Example, Mary invested $1 Million in her new business. The assets and owners equity would increase by $1 Million each.

Answer 2

Either A or C would be right, because it couldn't be a decrease of the equity.