A group of individuals formed a new company with an investment of $100,000. The most likely effect of this transaction on the company's accounting equation at the time of the formation is an increase in cash and

Question

Quizplus · Accepted Answer

The investment of $100,000 by the individuals in the new company increases the company's cash (an asset), and simultaneously increases the owners' capital (equity), reflecting the owners' claim on the company's assets. This is because the accounting equation (Assets = Liabilities + Equity) must remain in balance, and the investment increases both assets and equity without affecting liabilities.

A Group of Individuals Formed a New Company with an Investment