Given:
Selling price of goods = Rs 10,000
Cost of goods sold (COGS) = Rs 9,000
Step 1: Effect on Cash (Asset)
Cash increases by Rs 10,000 because the business receives money from the sale.
Step 2: Effect on Stock/Inventory (Asset)
Stock decreases by Rs 9,000 because goods worth Rs 9,000 are sold.
Step 3: Effect on Profit/Capital
Profit = Selling Price − Cost = 10,000 − 9,000 = Rs 1,000
Profit increases Capital/Owner’s Equity by Rs 1,000.
Step 4: Summary of Accounting Equation Effects
Assets: Cash ↑ 10,000, Stock ↓ 9,000 → Net ↑ 1,000
Equity (Capital): ↑ 1,000
✅ Accounting equation still balances.
Answer:
C) Increase in cash and capital and decrease in stock ✅
