CIE Accounting Paper-1: Specimen Questions 61 - 61 of 214

Question number: 61

MCQ▾

Question

How assets, liabilities and capital are affected by each of the following transaction with an accounting equation:

Purchase of machinery for cash $300000

Choices

Choice (4) Response
a.

Accounting equation for the purchase of assets.

shows given table in value of Machinery purchased

Transaction

Assets = Capital + Liabilities

Machinery purchased

Cash + Machinery = Capital + Liabilities

-300000 + 300000 = 0+0

b.

Accounting equation for the purchase of assets (Choice B)

shows given table in value of Machinery purchased

Transaction

Assets = Capital + Liabilities

Machinery purchased

Cash + Machinery = Capital + Liabilities

0 + 300000 = 0+300000

c.

Accounting equation for the purchase of assets (Choice C)

shows given table in value of Machinery purchased

Transaction

Assets = Capital + Liabilities

Machinery purchased

Cash + Machinery = Capital + Liabilities

300000 + 0= 0 + 300000

d.

Accounting equation for the purchase of assets (Choice D)

shows given table in value of Machinery purchased

Transaction

Assets = Capital + Liabilities

Machinery purchased

Cash + Machinery = Capital + Liabilities

300000 - 300000 = 0+0

Answer

a.

Explanation

Accounting equation always has a two sided effects. If Machinery purchased during the year for cash then it will reflected as increase the value of assets and decrease the value of cash.

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