An investment by the shareholders in a business increases
A)assets and shareholders' equity.
B)assets and liabilities.
C)liabilities and shareholders' equity.
D)assets only.

Question

Quizplus · Accepted Answer

When shareholders invest in a business, this increases the assets of the business (in the form of cash or other assets received) and also increases the shareholders' equity since they now have a claim on those assets. It does not increase liabilities, so options B and C can be eliminated. Option D is incorrect because the investment also increases shareholders' equity.

An Investment by the Shareholders in a Business Increases