Question

Question 1 View Policies /1 Current Attempt in Progress Presented below are eight business transactions. Indicate the effect of each transaction on each element of the accounting equation (a) Purchased $259 of supplies on account. (b) Performed $497 of services on account. () 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. O 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: (f a transaction couses a decrease in Assets, Liabilities or Owner's Equity, place a negative sign (or porentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Ilustration 1-13 for example.) Owner's Equity Liabilities Capital Drawings Re 936 AM Transaction Assets 1/19/2020 (a) $259 $259 so (b)

Answer 1

1. Purchase of supplies

Inventory on asset side will increase and simultaneously creditors for the purchase will increase on the liability side.

Inventory A/c Dr 259

To Creditors A/c 259

2. Performed services

Debtors will increase on the asset side and capital will increase on the liability side since income is increasing which is part of capital.

Debtors A/c Dr 497

To Income (capital) A/c 497

3. Operating expenses paid (assuming cash paid)

Cash on the liability side will decrease and capital on the liability side will decrease since the expenses incurred.

Expenses (capital) A/c Dr 291

To Cash 291

4. Cash paid to creditors

Cash on asset side and creditor on liability side will decrease since the liabilities are paid off in cash.

Creditors A/c Dr 251

To cash 251

5. Cash invested in business

Cash and capital will increase on the asset and liability side respectively

Cash A/c Dr 1191

To Capital A/c 1191

6. Hiring of employee has no impact on the accounting of the firm. Hence the asset and liability remain unaffected

7. Cash received from the debtors

Cash on the asset side will increase and debtors on the asset side will decreaser

Cash A/c Dr 497

To Debtors 497

8. Purchase of the equipment in exchange of the Note

Equipment on the asset side will increase and Notes payable on the liability side will increase by the $435

Equipment A/c Dr 435

To Note payable 435