Question

A sole trader takes out a loan of £5,000 from the bank. Which element(s) of the accounting equation will change due to this transaction? A Assets and liabilities only B Assets and capital only C Capital and liabilities only D Assets only

Answer 1

A Assets and liabilities

Step-by-step explanation:

Since the sole trader takes the loan of £5,000 from the bank that means the cash is increased because the receipts is received and the loan is also increased as the liability is created

So as per the given situation, both the assets and the liabilities are increased

Therefore the option a is correct and the same should be relevant