Asked by Fantasia Jessie on Jul 25, 2024
Verified
If a company receives $12,000 from a stockholder,the effect on the accounting equation would be:
A) Assets decrease $12,000 and equity decreases $12,000.
B) Assets increase $12,000 and liabilities decrease $12,000.
C) Assets increase $12,000 and liabilities increase $12,000.
D) Liabilities increase $12,000 and equity decreases $12,000.
E) Assets increase $12,000 and equity increases $12,000.
Accounting Equation
The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Shareholder's Equity, used to ensure that a company's financial statements are balanced.
Stockholder
An individual or entity that owns one or more shares of stock in a corporation, making them partial owners of the company.
Assets Increase
A situation where the value or volume of a company's assets rises due to acquisition or appreciation.
- Comprehend the effects of transactions on financial statements and the accounting equation.
Verified Answer
MM
Manthan MittalJul 28, 2024
Final Answer :
E
Explanation :
When a company receives money from a stockholder, it is considered a contribution of capital, which increases the equity section of the accounting equation. Therefore, assets increase by $12,000 and equity also increases by $12,000.
Learning Objectives
- Comprehend the effects of transactions on financial statements and the accounting equation.