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SSC Financial and Cost Accounting P-1 QUESTION #9637
Question 1
Under the Single Entry System, which of the following changes DECREASES the owner's equity (net assets)?
  • Increase in Debtors
  • Increase in Creditors✔️
  • Decrease in Creditors
  • Decrease in Bank Overdraft
Correct Answer Explanation
An increase in liabilities (such as creditors) reduces the net assets (Assets – Liabilities), thus decreasing the owner's equity. Increases in assets increase equity; decreases in liabilities also increase equity.