Question

Presented below are a number of transactions. Determine whether each transaction affects common stock, dividends, revenue, expense, or does not affect stockholders’ equity. Provide titles for the revenues and expenses. Select Not applicable for account title if neither a revenue nor an expense.

Transaction Affects Account Title (a) Costs incurred for advertising. (b) Cash received for services performed. (c) Costs incurred for insurance. (d) Amounts paid to employees. (e) Cash distributed to stockholders. (f) Cash received in exchange for allowing the use of the company’s building. (g) Costs incurred for utilities used. (h) Cash purchase of equipment. (i) Cash received from investors.

Answer 1

Transaction Account affected

Cost incurred for advertising Expense account

Cash received for service Revenue account

Cost incurred for insurance Expense account

Amount paid to employees Expense account

Cash distributed to stockholder Dividend account

Cash received for allow use of building   Revenue account

Cost incurred for utilities Expense account

*Cash purchase of equipment Does not affect stockholder's equity

Cash received for investor common stock account

* Equipment purchase for cash affect asset side of balance sheet.