A shareholder makes an investment in a company. The net effect of this contribution is an increase in:
A) share capital only.
B) both assets and share capital.
C) both assets and liabilities.
D) both liabilities and share capital.

Question

Quizplus · Accepted Answer

When a shareholder makes an investment in a company, the company's assets increase (cash or other assets received from the shareholder) and the share capital also increases (the investment amount from the shareholder). There is no impact on liabilities, so options C and D can be eliminated. Option A is also incorrect because it suggests that there is no impact on assets, which is not true as mentioned above.

A Shareholder Makes an Investment in a Company