Atima opens her business by investing $10,000 cash

Accounting Dec 16, 2020

Atima opens her business by investing $10,000 cash. How does this affect the accounting equation?

Expert Solution

When investment is made, an entry will include a debit to cash and a credit to the capital account. This transaction will result in increased in assets and increased in equity in the same amount. Therefore, the accounting equation of assets is equal to liabilities and equity is still maintained, although the balance of both assets and equity increased by 10,000.

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