Which one of the following combination of rules stands true while preparing schedule of changes in working capital? 1. An increase in current assets increases working capital. 2. An increase in current assets decreases working capital. 3. An increase in current liabilities decreases working capital. 4. An increase in current liabilities increases working capital.

The correct answer is B. Both 1 and 3.

Working capital is the difference between current assets and current liabilities. Current assets are assets that are expected to be converted into cash or used up within one year. Current liabilities are liabilities that are due to be paid within one year.

An increase in current assets increases working capital because it increases the amount of money that the company has available to use. An increase in current liabilities decreases working capital because it increases the amount of money that the company owes.

Therefore, both 1 and 3 are true statements. An increase in current assets increases working capital, and an increase in current liabilities decreases working capital.

Option 2 is false because an increase in current assets does not decrease working capital. Option 4 is false because an increase in current liabilities does not increase working capital.