Which one of the following changes describes the receipt of 2,000 from the issuance of common stock?
a. assets and owners' equity increase by 2,000
b. assets and owners' equity decrease by 2,000
c. assets and liabilities increase by 2,000
d. assets increase and owners' equity decreases by 2,000
e. assets increase and decrease by the same amount


Which of the following changes describe the purchase of 3,000 equipment financed by the issuance of long-term note payable?
a. assets and owners' equity increase by 3,000
b. assets and owners' equity decrease by 3,000
c. assets and liability increase by 3,000
d. assets and liabilities decrease by 3,000
e. no changes in total assets, liability or owners equity

The answers are:

a. assets and owners' equity increase by 2,000

And,

c. assets and liability increase by 3,000

I will tell you a quick hint to remember always, think of it from the debit and credit side.
Rule of Thumb: Any increase in assets, is debit, any increase in liabilities and owners equity is credit and vice versa. Thus, the above answer is absolutely correct.

Moussa Hawas
Fundamental Equity Analyst