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SSC Financial and Cost Accounting P-1 QUESTION #6053
Question 1

Mahnoor transfers her personal car into her newly established business. Which two elements of the accounting equation will be affected?

  • Capital and liabilities
  • Capital and profit
  • Liabilities and assets
  • Assets and capital✔️
Correct Answer Explanation

The accounting equation is: Assets = Capital + Liabilities. When Mahnoor brings her car into the business, the business gains an asset (the car), and simultaneously the owner's capital increases by the same amount (as it is a capital contribution). No liability is created and no profit is involved. So both Assets and Capital increase by the same value, keeping the equation balanced.