Question

We know that the double-entry system of accounting means that every transaction has at least two effects on the accounting equation. Can you give one example of each of the transactions that are mentioned below?

-(1) One asset goes up and another asset goes down.

-(2) An asset and a liability both go up.

-(3) One liability goes up and another liability goes down.

-(4) An asset goes up and the equity goes up to.

Answer 1

(1) One asset goes up and another asset goes down:

Example: Purchase of Furniture in Cash is recorded as

Furniture Account Debit

Cash Account Credit

Where, Furniture and Cash both are assets, one asset i.e. Furniture goes up, by debit and the other asset i.e. cash goes down by credit.

(2) An Asset and Liability both go up:

Example: Receipt of Bank Loan

Cash at Bank Account Debit

Bank Loan Account Credit

Here, Cash at Bank is an asset which goes up due to debit and Bank Loan is a liability which also goes up by credit.

(3) One Liability goes up and another liability goes down:

Example: Payment of Bank Loan by Partner's Personal Account

Bank Loan Debit

Partner's Perosonal Account Credit

Here, Partner's Capital Account is a liability which increases by a credit when he pays off the Bank Loan, and Bank Loan goes down with a debit.

(4) An Asset goes up and equity goes up:

Example: Issue of Capital

Cash at Bank Account Debit

Share Capital Credit

Here, Shares are issued and credit increases this liability, whereas, cash is debited which shows and increase in this asset.