Manag., December-2019 – Q70

70Pearl Ltd. The company purchased a van for Rs.12,000 making a down payment of Rs.5,000 cash and signing an Rs.7,000 note payable in 60 days. As a result of this transaction:
(a) Total assets will increase by Rs.12,000
(b) Total liabilities will increase by Rs.7,000
(c) This transaction will not have immediate effect on the owner’s equity in the business
(d) From the point of view of short-term creditor, this transaction will make business more liquid
Choose the correct option:

Option : D
Explanation : Total Fixed Assets increased by Rs.12000 Less Cash (Current Assets) decreased by Rs.5000
Total Assets increased by Rs.7000
Total liabilities will increase by Rs.7000.

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