Helen decides to open her own ice-cream store and deposits $25 000 into her new business bank account on 1 October. The effect of this transaction on the accounting equation is:
A) Assets increase by$25 000; Equity increases by $25 000.
B) Assets increase by $25 000; Equity decreases by $25 000.
C) Assets increase by $25 000; Liabilities increase by $25 000.
D) Assets decrease by $25 000; Equity decreases by $25 000.

Question

Quizplus · Accepted Answer

When Helen deposits $25,000 into her new business bank account, it increases the assets of the business by $25,000, as cash is an asset. At the same time, the equity of the business also increases by $25,000 as Helen has contributed her own money to the business. Therefore, the effect on the accounting equation is that assets increase by $25,000 and equity increases by $25,000.

Helen Decides to Open Her Own Ice-Cream Store and Deposits