Knowee
Questions
Features
Study Tools

A sole trader sells goods for cash for $500 which had cost of $300. Which elements of the accounting equation will change due to this transaction?Question 12Answera.Assets and capitalb.Assets onlyc.Assets and liabilitiesd.Capital and liabilities

Question

A sole trader sells goods for cash for 500whichhadcostof500 which had cost of 300. Which elements of the accounting equation will change due to this transaction?Question 12Answera.Assets and capitalb.Assets onlyc.Assets and liabilitiesd.Capital and liabilities

🧐 Not the exact question you are looking for?Go ask a question

Solution

The elements of the accounting equation that will change due to this transaction are Assets and Capital.

Here's why:

  1. The sole trader sells goods for cash. This increases the cash asset by $500.

  2. The cost of the goods sold was 300.Thisisanexpense,whichreducesthecapital(owner′sequity)by300. This is an expense, which reduces the capital (owner's equity) by 300.

  3. The difference between the selling price and the cost price (500−500 - 300 = 200)istheprofit,whichincreasesthecapitalby200) is the profit, which increases the capital by 200.

So, the net effect is an increase in assets (cash) by 500andanincreaseincapitalby500 and an increase in capital by 200 (profit). Therefore, the correct answer is a. Assets and Capital.

This problem has been solved

Similar Questions

A sole trader is $5,000 overdrawn at the bank and receives $1,000 from a credit customer in respect of its account. Which elements of the accounting equation will change due to this transaction?Question 6Answera.Assets onlyb.Assets, liabilities, and capitalc.Assets and liabilities onlyd.Liabilities only

A sole trader borrows $10,000 from the bank. Which elements of the accounting equation will change due to this transaction?Question 6Answera.Assets onlyb.Capital and liabilitiesc.Assets and capitald.Assets and liabilities

A sole trader increases the business's number of motor vehicles by adding his own car to its fleet. Which elements of the accounting equation will change due to this transaction?Question 1Answera.Capital onlyb.Assets onlyc.Assets and liabilitiesd.Assets and capital

Withdrew 150 cash from the bank and placed it in the cash box. What is the effect of the transaction on the accounting equation? A. Decrease in Assets ,Decrease in Equity B. Increase in Equity ,Increase in Liability C. Increase in Assets ,Decrease in Assets D. Decrease in Liability ,Increase in Capital

As which one of the following can the accounting equation be rewritten as?Group of answer choicesA. Assets –liabilities – operating capital + drawings = operating profitsB. Assets - profit –drawings = closing capital – liabilitiesC. Assets + profits – drawings – liabilities = closing capitalD. Assets – liabilities – drawings = operating capital + profits

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.