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WAEC Financial Accounting 2010 Question 28

Question 28

Interpretation of Accounts

Which of the following transactions will increase the working capital of a business?

  1. A.Payment in cash to a creditor
  2. B.Payment by cheque to a creditor
  3. C.Sale of fixed asset in cash
  4. D.Cash received from debtors
Show the answer and explanation

Answer: C (Sale of fixed asset in cash)

Explanation

Selling a fixed asset for cash adds a current asset with no new current liability, so working capital rises; the other three only swap current items.