If a company receives $12,000 from the owner to establish a proprietorship,the effect on the accounting equation would be:

Question

Quizplus · Accepted Answer

When the owner invests $12,000 to establish a proprietorship, it increases the assets of the business by $12,000 (cash received) and also increases the equity of the owner by $12,000 (capital introduced). Therefore, there is an increase in both assets and equity by $12,000, making Option E the correct choice. This transaction does not affect any liabilities of the business.

If a Company Receives $12,000 from the Owner to Establish