Question

Which of the following entries will result in an increase in both assets and liabilities?

Options

• Owner brings additional capital into the business.

• Bank loan taken and credited to the bank account.

• Purchase of goods on credit.

• Purchase of furniture by cash.

Answer 1

Bank loan taken and credited to the bank account.

Explanation:

When a bank loan is taken, the firm’s bank balance (asset) increases, and at the same time, a loan liability is created. Hence, both assets and liabilities increase.