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UI Post-UTME Financial Accounting 2025 (Model questions) Question 2

Question 2

Accounting Equation

A trader's capital account will DECREASE when:
I. Net profit is recorded
II. Drawings are made
III. Additional capital is introduced
IV. Net loss is recorded

  1. A.I and III only
  2. B.II and III only
  3. C.II and IV only
  4. D.I and IV only
Show the answer and explanation

Answer: C (II and IV only)

Explanation

Drawings and losses reduce capital; profit and new capital increase it.