An owner invests $20,000 in her new business by depositing the cash in the business's checking account. Which of the following occurs?

Question

Quizplus · Accepted Answer

When an owner invests cash in a business, the cash account (an asset account) increases. In accounting, an increase in an asset account is recorded as a debit. Therefore, cash is debited for $20,000. Capital (owner's equity) increases as well, but this increase is recorded as a credit, not a debit, so option C is incorrect.

An Owner Invests $20,000 in Her New Business by Depositing