When a business has been granted a bank loan and the money transferred into its bank account, the impact on its assets and / or liabilities is:
Select ONE answer:
- Effect upon Assets – Decrease bank / Effect upon Liabilities – Decrease loan
- Effect upon Assets – Decrease bank / Effect upon Liabilities – Increase debtors
- Effect upon Assets – Increase bank / Effect upon Liabilities – Increase loan
- None of the above
Show your workings to arrive at your answer, and explain and justify your reasons:
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This is multiple choice question is suitable for Accounting KS5 classes.
The answer is 3 – As a result of the business being granted a bank loan and receiving money into its bank account, then it now has more money in its bank account than it previously enjoyed, and it owes more money to the bank than it previously had.
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