Question

On ABC's balance sheet, the common stock and paid in capital account rose by $4,000 which would cause cash to increase. True or False?

Answer 1

SOLUTION:

“TRUE”

Here it is said that for ABC Ltd., the common stock and paid in capital increased by $4000 which cause increase in cash. The above statement is true.

Paid up capital refers to the amount that the company receives from the by selling their shares to investor. That means it is simply referred to as the amount received from the shareholders.

Common stock refers to the security that shows the ownership in a company in the form of equity. So it’s also called as equity shares.

ASSET=LIABILITIES +OWNERS EQUITY

If common stock raise in business the asset also increases that means cash.so it indicates that the company will get $4000 .Same as in the case of paid up capital .And since the cash is increased it is debited and both common stock and paid up capital is credited.