Question

Using a current or prior place of work as an example business, think of ONE typical business transaction and then address the following points: 1. Describe the transaction. 2. What is the impact on TOTAL ASSETS (increase or decrease)? 3. What is the impact on TOTAL LIABILITIES (increase or decrease)? 4. What is the impact on TOTAL OWNER'S EQUITY (increase or decrease)? Be specific and provide detail. If you are unfamiliar with real life examples, you are free to use a hypothetical business that operates in an industry that interests you. We will continue to dig into your example during the week.

Answer 1

Test Example = Purchase of a Plant against issuance of Stocks, Bank Loan and Cash.

1. In the Example a company has purchased a plant from a Old competitive firm. Funding of the same is been done with the help of issuance of Common Stock, Bank Loan and Cash in Hand

2. The following transaction will increase the Assets Plant with the amount of the same and will reduce the Asset with the amount of Cash paid.

3. The following transaction will increase the liability as Bank Loan has been taken to purchase the plant.

4. The following transaction will also increase the Owner's Equity as Shares are issued for acquiring the plant.