Question

1. Identify the normal balance of the account and the side on which it increases and decreases for the Liability Account.

2. Develop two transactions for the Liability Account, one that results in an increase to the account group and one that results in a decrease to the account. For each transaction (increase/decrease) prepare the following information.

a. Written description of the business transaction

b. Explanation of an accounting principle or assumption that applies to the transaction.  

c. Journal entry of the transaction that involves at least two accounts, correctly formatted with the date, account name, debit or credit, and explanation line.

d. Demonstrate the accounting equation remains in balance after the transaction.

e. Show the effect on the financial statements first affected by the transaction.

SHOULD CREATE OWN TRANSACTION!

Answer 1

1)The normal balance of the account is credit and if it is increases then credit increases and decreases means debit increases
2)increase in liability
a)Salaries payable for month amounting 5000
b)the salaries will be paid at first week of the next month for the previous month
c)salaries expense(db)5000
salaries payable(Cr)5000
d)assets=liability+equity
here the liablity increases and owner equity decreases and net no effect
e)the effects on the financial statement is balance sheet and income statement
balance sheet no effect
income statement the expense is increased and net income decreases

decrease in liabiltiy:
a)The accrued salary is paid amounting 5000
b)the salaries will be paid at first week of the next month for the previous month
c)salaries payable(db)5000
cash(cr)5000
d)assets=liability+equity
here the liablity decreases and assets decreases
e)the effects on the financial statement is balance sheet and income statement
balance sheet the assets and liabilites decreases
income statement there is no effect