1. If Assets = ?5,00,000 and Capital = ?3,00,000, what are the Liabilities?
?5,00,000
?3,00,000
?2,00,000
?8,00,000
Explanation:
Accounting Equation: Assets = Liabilities + Capital. Therefore, Liabilities = Assets - Capital. 5,00,000 - 3,00,000 = 2,00,000.
2. Net Profit earned during the year will:
Increase Capital
Increase Assets
Decrease Capital
Increase Liabilities
Explanation:
Profit belongs to the owner. Therefore, Net Profit is added to the Capital at the end of the year, increasing the owner's equity.