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

Question

Quizplus · Accepted Answer

When the owner contributes her private vehicle to the business, the asset of the business is increased as the vehicle is now owned by the business. This increases the asset side of the balance sheet, and as the vehicle has been contributed by the owner, it increases the equity of the business. Therefore, the correct answer is choice A - increase asset vehicle; increase equity.

The Effect on the Statement of Financial Position When the Owner