Question

What is the impact on the Accounting Equation when Rosemary deposits $10,000 of her own money into her business?

a) Assets increase; Liabilities increase
b) Assets increase; Owner's equity increases
c) Assets decrease; Owner's equity decreases
d) Liabilities decrease; Owner's equity increases

Answer 1

When Rosemary deposits $10,000 of her own money into her business, it increases the Assets and the Owner's Equity of the business.

Step-by-step explanation:

When Rosemary deposits $10,000 of her own money into her business, there is an impact on the Accounting Equation. The Accounting Equation is Assets = Liabilities + Owner's Equity. In this case, Rosemary's deposit increases the Assets of the business, as cash is considered an asset. Simultaneously, the Owner's Equity also increases because Rosemary's personal funds contribute to the equity of the business.

Therefore, the correct answer is b) Assets increase; Owner's equity increases.