Which of the following is/are correct regarding the accounting equation? 1. The equation always holds true under the double entry system. 2. Purchase of goods on credit increases assets and liabilities. 3. Payment to creditors decreases assets and increases liabilities. 4. Introduction of capital by the proprietor increases both assets and capital. MCQ with Answer and Explanation
Which of the following is/are correct regarding the accounting equation? 1. The equation always holds true under the double entry system. 2. Purchase of goods on credit increases assets and liabilities. 3. Payment to creditors decreases assets and increases liabilities. 4. Introduction of capital by the proprietor increases both assets and capital.
A. All of the above
B. 2, 3 and 4
C. 1, 2 and 3
D. 1, 2 and 4
Answer: Option D
Solution (By JKSSB Mock Tests)
Statement 3 is incorrect because payment to creditors decreases both assets (cash/bank) and liabilities (creditors). 1, 2, and 4 are correct.
Explanation:
Section 135 mandates a CSR Committee for companies that meet specific thresholds of net worth (₹500 Cr+), turnover (₹1000 Cr+), or net profit (₹5 Cr+) in the preceding financial year.
Explanation:
Vouching is considered the backbone of auditing because it provides the primary evidence for the transactions recorded. It verifies authenticity by checking supporting documents. R correctly explains why it is the backbone.
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