1. Yellow Ltd purchased inventory of R40 000 on credit from one of its suppliers. Which one of the following classifications of this transaction is correct?

a.

R40 000 decrease in assets (cash) and increase in liabilities (accounts payable).

b.

R40 000 increase in assets (inventory) and increase in liabilities (accounts payable).

c.

R40 000 decrease in assets (cash) and increase in assets (inventory).

d.

R40 000 increase in assets (inventory) and decrease in liabilities (accounts payable).

2. Dividends of R30 000 was paid in cash to the shareholders of Purple Ltd. Which one of the following classifications of this transaction is correct?

a.

R30 000 decrease in assets (cash) and decrease in equity (stated capital).

b.

R30 000 increase in assets (cash) and decrease in equity (stated capital).

c.

R30 000 increase in liabilities (cash) and decrease in equity (retained earnings).

d.

R30 000 decrease in assets (cash) and decrease in equity (retained earnings).