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When stock is purchased on credit:
A.net assets and owner capital do not change
B.net assets increase and owner capital increase
C.net assets decrease and owner capital decreases
D.net assets increase and owner capital stays the same.What’s the answer and How???
Why on earth are you attempting questions for which you do not have an answer? It is wasting your time.
You should be using a Revision Kit from one of the ACCA approved publishers – they are full of exam standard questions and question practice is vital to passing the exam.
If inventory is purchased on credit, then current assets increase (because inventory is a current asset) and current liabilities increase (because buying on credit creates a current liability). So net assets will not change, and of course capital will not change (because there has been no profit, no drawings, or no capital introduced).
Do please watch my free lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
(And do note that we stopped using the word ‘stock’ many years ago. The exam will not refer to ‘stock’ – the correct word is ‘inventory’.)
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