Question

What is the impact on the Accounting Equation when Rosemary deposits $2,000 of her own money into "Herbs Business Checking Account"?

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 $2,000 of her own money into 'Herbs Business Checking Account', the impact on the Accounting Equation is that Assets increase; Owner's equity increases.

Step-by-step explanation:

The impact on the Accounting Equation when Rosemary deposits $2,000 of her own money into 'Herbs Business Checking Account' is that Assets increase; Owner's equity increases.

The Accounting Equation is Assets = Liabilities + Owner's Equity. When Rosemary deposits $2,000 into her business checking account, the assets of the business increase by $2,000. At the same time, her ownership interest in the business also increases by $2,000, which is represented by the increase in owner's equity.

In this case, the increase in assets is equal to the increase in owner's equity because Rosemary deposited her own money into the business account, so there is no change in liabilities.