Sonya invested cash in her new business. What effect will this have?
A) Increase an asset and increase a liability.
B) Decrease an asset and increase a liability.
C) Increase an asset and increase owner's equity.
D) Increase an asset and decrease owner's equity.

Question

Quizplus · Accepted Answer

Investing cash in a business would increase the business's cash asset, which would also increase the owner's equity in the business as an asset. This transaction would not affect any liabilities, so options A and B can be eliminated. Option D is also incorrect because increasing an asset would not decrease owner's equity.

Sonya Invested Cash in Her New Business