Ilona's business bank account at 1 May 20X7 has a balance of £13 000 in her favour. On 2 May 20X7 she buys a non-current asset for £10 000.
On 3 May 20X7 she receives an amount owing of £3600.
What is the effect of these transactions on Ilona's total assets?
A)Increase total assets by £6400
B)Decrease total assets by £6400
C)Increase total assets by £3600
D)Increase total assets by £10 000

Question

Quizplus · Accepted Answer

The purchase of the non-current asset decreases Ilona's current assets by £10 000. However, receiving an amount owing of £3600 increases her current assets by £3600. Therefore, the overall effect on her total assets is an increase of £3600. Option D is incorrect because the purchase of the non-current asset does not increase total assets, as it is not a current asset that can be easily converted into cash.

Ilona's Business Bank Account at 1 May 20X7 Has a Balance