Michael Anderson is starting a computer programming business and has deposited an initial investment of $15,000 into the business cash account. Identify how the accounting equation will be affected.
A) increase in assets (Cash) and increase in liabilities (Accounts Payable)
B) increase in assets (Cash) and increase in owner's equity (Michael Anderson, Capital)
C) increase in assets (Accounts Receivable) and decrease in liabilities (Accounts Payable)
D) increase in assets (Cash) and increase in assets (Accounts Receivable)

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. Since Michael Anderson deposited $15,000 into the business cash account, there is an increase in the assets (Cash). Since the money came from Michael's initial investment, there is also an increase in owner's equity (Michael Anderson, Capital). Therefore, the accounting equation is balanced with an increase in both assets and owner's equity. Option A is incorrect because there is no increase in liabilities. Option C is incorrect because there is no increase in accounts receivable and decrease in accounts payable. Option D is incorrect because there cannot be an increase in two different types of assets at the same time.

Michael Anderson Is Starting a Computer Programming Business and Has