The effect on the balance sheet when the owner contributes her private vehicle for the exclusive use of the business is:
A) increase asset vehicle; increase owner's drawings.
B) increase asset vehicle; decrease equity.
C) increase asset vehicle; increase equity.
D) none of the above.

Question

Quizplus · Accepted Answer

When the owner contributes her private vehicle for the exclusive use of the business, the asset account for the vehicle will increase because the business now has ownership and use of the vehicle. Additionally, the owner's equity account will increase by the same amount, reflecting the additional value that the owner has brought to the business by contributing the vehicle. There is no impact on owner's drawings, as they represent funds that the owner withdraws from the business, rather than assets contributed to the business. Therefore, the correct answer is (C), increase asset vehicle; increase equity.

The Effect on the Balance Sheet When the Owner Contributes