Question

For each of the transactions below, record whether it would result in an increase or decrease in assets, liabilities, and net assets. Provide an answer for assets, liabilities, and net assets for each of the following transactions.

An organization:

Earns revenue

Receives a donor pledge

Purchases supplies with cash

Purchases supplies on account

Takes out a loan

Repays loan principal

Receives payment on a pledge

Makes a payment on an amount it owes

Prepays for insurance

Uses prepaid insurance

Uses supplies

Uses a capital asset

Receives cash in advance of providing goods or services goods or services to a client.

Provides goods and services to a client in exchange for a cash payment that was made in advance.

Employs workers who earn wages

Pays employee wages that have been earned

Deems a portion of a pledge is uncollectible

Pays interest on a loan

Answer 1

Net asset = Total asset - Current liabilities - long term liabilities

*Earn revenue - Increases cash balance in asset side, also increases retained earnings in the equity section on the liabilities side, also the net asset increase at the asset side increase without the increase in outside liabilities and long term liabilities.

*Receives a donor pledge - It is recorded as account receivable on the asset side which increases asset side as asset increases net asset also increases.

*Purchases supplies with cash - Cash decreases with equal amount of increase in stock so no effect on asset side also no effect on net asset and liabilities.

*Purchases supplies on account - Increases stock on asset side so asset increases also bought on credit so same amount increase in trade payable so liabilities increses as both asset and liabilities increse with same amount no impact on net asset.

*Takes out a loan - Increase cash on the asset side with increase in same amount of long term loan on the liabilities side with no effect on net assets.

*Repays loan principal - Decreases cash on the asset side with equal amount of decrease in loan on the liabilities side so no effect on the net asset.

*Receives payment on a pledge - Increase s cash on the asset side and decrease of account receivable on the asset side with same amount therefore no effect on asset side , no effect on liabilities side and hence no effect on net asset.

*Making payment on amount it owes - Decreases cash on asset side , decreases account payable on liabilities side with no effect on net asset.

*Prepays for insurance - Decreases cash on asset side with equal amount of Increase in prepaid expense on the asset side so no effect on asset side , no effect on liabilities side and hence no effect on net asset.

*Uses prepaid insurance - Decreases prepaid insurance on the asset side so, asset decreases with no effect on liabilities and as asset decreases net asset also decreases.

*Uses Capital asset - Use of Capital asset decreases the fixed asset on asset side so asset decreases no effect on liabilities so net asset decreases.

*Receives cash in advance for goods and service sold - Increases cash on the asset side with same amount of increase in current liabilities so liavliabili increses with same amount so no effect on net assets.

*Goods sold for advance payment - Stock decreases so asset decreases also current liabilities recorded before of same amount decreases so no effect on net asset.

*employs workers to whom earn wages - Until wages are paid it is recorded as wages payable on liabilities side so liabilities incresaes no effect on asset so, net asset decreases.

* Wages paid - Decreases cash on the asset side so asset decreases also wages payable decreases on the liabilities side so liabilities decreases so, no effect on net assets.

*Uncollectible pledge - It decreases account receivable on the asset side so asset decreases with no effect on liabilities so, net asset decreases.

*Pay interest on loan - Cash decreases on asset side so asset decreases also interest on loan on the liabilities side decreases so liabilities decreases and there is no effect on onet assets.