Question

es/34918/assignments/3638945 Presented below are eight business transactions. Indicate the effect of each transaction on eachelement of the accounting equation. (a) Purchased $259 of supplies on account. (b) Performed $497 of services on account. (c) Paid $291 of operating expenses. (d) Paid $259 cash on account for the supplies purchased in item (a) above. (e) Invested $1,191 cash in the business. () Owner withdrew $350 cash. (g) Hired an employee to start working the following month. (h) Received $497 from a customer who had been billed previously in item (b) above. (i) Purchased $435 of equipment in exchange for a note payable. Use the below format, in which the first one has been done for you as an example: (If a transaction causes a decrease in Assets, Liabilities or Owner's Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 1-13 for example.) Owner's Equity Transaction Assets Liabilities Capital Drawings (a) $259 $259 $0 (b) $497 $0 (c) $1291) (d) ($259) ($259)

Answer 1

	Assets	=	Liabilities	+	Capital	-	Drawings
a	$259		$259
b	$497				$497
c	(-) $291				(-) $291
d	0		0		0
e	$1,191				$1,191
f	(-) 350						$350
g
h	0		0		0		0
i	$435		$435

Explanation

a) Purchasing supplies on account will increase assets and Liabilities by $259.

b) $497 is owed by customer to the company for services rendered. This increases asset(accounts receivable). It also increases income of the company which in turn increases profits of company and ultimately the owners capital.

c) Paying operating expenses reduces assets and capital by $291.

d) The net effect of this transaction will be zero.

e) Cash invested in business increase Assets and Capital by $1,191.

f) Withdrawal by owners will reduce Assets by $350 and increase drawings by $350.

g) Hiring an employee does not affect accounting equation as this not a financial transaction.

h)Money received from customer will increase cash by $497 but will reduce account receivable by $497. So the next effect is zero.

i) Purchasing equipment in exchange of note payable will increase assets by $435 and Liabilities by $435.