If at the end of the financial year,2 months' interest is owing to the company from the bank,the effect on the accounting equation is that:
A) an asset increases and another asset decreases
B) a liability increases and another liability decreases
C) an asset decreases and a liability decreases
D) an asset increases and owners' equity increases

Question

Quizplus · Accepted Answer

The interest owed by the bank is considered accrued income, which increases assets (interest receivable) and also increases owners' equity as it represents income earned.

If at the End of the Financial Year,2 Months' Interest