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, the company's assets increase by $12,000 (cash received). At the same time, the owner's equity in the business also increases by $12,000 (capital contribution), thus resulting in an increase of both the assets and the equity side of the accounting equation. Therefore, option D is the correct answer.

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