Question

The following is a list of economic events:

i) Purchased inventory on account

ii) Paid dividends at the end of the year

iii) Received cash in payment for services

iv) Issued shares (contributed equity) for cash

v) Paid rent in cash

vi) Received a bill for electricity used

vii) Bought equipment for cash

viii) Billed customers for services

to make consistent with other answer formats change to:

a) indicate the accounts that would be affected by each transaction

b) Indicate whether each transaction increases, decreases or has no effect on assets liabilities or shareholders equity.

Answer 1

Solution a:

S. No	Transactions	Account Affected
		Debit	Credit
i	Purchased inventory on account	Inventory	Accounts payable
ii	Paid dividends at the end of the year	Dividends	Cash
iii	Received cash in payment for services	Cash	Service revenue
iv	Issued shares (contributed equity) for cash	Cash	Common stock
v	Paid rent in cash	Rent Expense	Cash
vi	Received a bill for electricity used	Utilities expense	Utilities payable
vii	Bought equipment for cash	Equipment	Cash
viii	Billed customers for services	Accounts receivables	Service revenue

Solution b:

S. No	Transactions	Effect on Assets, Liabilities and sharholder's Equity
		Assets	Liabilities	Sharholders Equity
i	Purchased inventory on account	Increase	Increase	No Effect
ii	Paid dividends at the end of the year	Decrease	No Effect	Decrease
iii	Received cash in payment for services	Increase	No Effect	Increase
iv	Issued shares (contributed equity) for cash	Increase	No Effect	Increase
v	Paid rent in cash	Decrease	No Effect	Decrease
vi	Received a bill for electricity used	No Effect	Increase	Decrease
vii	Bought equipment for cash	No Effect	No Effect	No Effect
viii	Billed customers for services	Increase	No Effect	Increase