Read the given below two statements and mark the correct answer.
Assertion (A): Any Increase in capital is credited and decrease in capital is debited.
Reason (R) : Paid the monthly store rent ₹20,500 in cash. This transaction affects capital account.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Assertion (A) is true but Reason (R) is False.
Assertion (A): Any Increase in capital is credited and decrease in capital is debited. This is true. Capital represents the proprietor funds. Any increase in capital is credited and decrease is debited. Capital can be increased or decreased by profit and drawings respectively.
Reason (R) : Paid the monthly store rent ₹20,500 in cash. This transaction affects capital account. This is false. This transaction affect cash account i.e. asset and rent account i.e. expense.