Question

In: Accounting

Analyze the transactions described below and indicate their effect on the basic accounting equation. Use a...

Analyze the transactions described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (—) to indicate a decrease.

Assets = Liabilities + Owner's Equity
1. Received cash for services performed. ________ ________ ________
2. Purchased office equipment on credit. ________ ________ ________
3. Paid employees' salaries. ________ ________ ________
4. Received cash from customer in payment
on account. ________ ________ ________
5. Paid telephone bill for the month. ________ ________ ________
6. Paid for office equipment purchased in
transaction 2. ________ ________ ________
7. Purchased office supplies on credit. ________ ________ ________
8. Proprietor withdrew cash for personal
expenses. ________ ________ ________
9. Obtained a loan from the bank. ________ ________ ________
10. Billed customers for services performed. ________ ________ ________

Solutions

Expert Solution

Solution
Asset = Liability + Owners Equity Explanation
1 Received cash for services performed. ( + ) ( + ) Increase in asset( cash) and increse in equity (income earned received)
2 Purchased office equipment on credit. ( + ) ( + ) Increase in assets(equipment) increase in liability(accounts payable)
3 Paid employees' salaries. ( - ) ( - ) Decrease in assets(cash) decrease in equity(expense)
4 Received cash from customer in payment ( + ) Increase in asset(cash) decrease in asset(accounts receivables)
( - )
5 Paid telephone bill for the month. ( - ) ( - ) Decrease in asset(cash) decrease in equity(expenses)
6 Paid for office equipment purchased in transaction 2. ( - ) ( - ) Decrease in asset(cash) decrease in liability(accounts payable)
7 Purchased office supplies on credit. ( + ) ( + ) Increase in assets(office supplies) increase in liability(accounts payable)
8 Proprietor withdrew cash for personal expenses. ( - ) ( - ) Decrese in asset(cash) decrease in equity(drawings)
9 Obtained a loan from the bank. ( + ) ( + ) Increase in asset(cash) increase in liability(bank loan)
10 Billed customers for services performed. ( + ) ( + ) Increase in asset( accounts receivbles) increase in equity(income earned)
Note
Accounting Equation
Assets = Liabilities + Owner's Equity is accounting equation also known as Balancesheet equation.
Assets represents company owned valuable resources.
Equity and Liability of a company shows how the assets are financed.
Financing by shares is Owners Equity
Financing by debt is Liabilities
The net effect of increase or decrese in accounting equation is same after each entry in double entry system

ekkarill92 answered 3 years ago
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