Question

Indicate the effect of the following transaction on the elements of the accounting equation. Purchased land by signing a nine-month, non-interest-bearing note payable. assets increase; liabilities increase assets decrease; liabilities decrease assets increase; owner's equity increase assets increase; owner's equity decrease Question 2 3 pts Received $12,000 cash for services provided to a customer. debit accounts receivable; credit fees earned debit cash; credit fees earned debit fees earned; credit cash debit cash; credit supplies expense

Answer 1

Ques 1. Correct answer

(a) Assets increase and liability increase.

Explanation: This is because as a result of the above transaction the land will appear in books of accounts which is a Fixed assets and also correspondingly Note payable will appear which is a short term borrowing sice it is for less than 12 months.

Journal entry:   Land a/c Dr.

To non interest bearing notes payable a/c

Ques 2. Correct answer

(b) Debit cash : credit fees earned

Explanation: This is because it is mentioned in the ques that cash has been received from the customer for the services provided. So as a result of which cash will be increased and correspondingly revenue will increase.

Journal entry: Cash a/c Dr.

To credit fees a/c

Ques 3 Correct answer

(d) accounts payable

Explanation: Accounts payable is the money owed by business to its suppliers i.e. creditors for goods purchased or services procured from them. We can use both accounts payable and trade payables for amount due to suppliers.

Journal entry: Purchases Dr.

To Accounts/ trade payable a/c

Ques 4 Correct answer

(d) assets decrease and owners equity decrease

Explanation: This is because as a result of above tranasaction cash will decrease from business and correspondingly capital will decrease.

Journal entry: Drawings Dr.

To Cash

( Being cash withdrawn from business)

Capital a/c Dr.

To Drwaings

( Being drawings t/f to capital a/c)

Ques 5 Correct answer

(b) False

Explanation: Debit refers to the left hand side of T account and credit refers to right hand side of T account. It is denoted below

Dr Cr

Ques 6 Correct answer

(a) assets decrease and owners equity decrease

Explanation: This is because as a result of above tranasaction there will be outflow of cash and correspondingly misc expense will be debited in P/L a/c which will utimately result in decrease in owners equity when profit/loss will be t/f to owners capital.

Journal entry: Misc exp Dr.

To Cash

( being misc exp incurred)

Capital a/c Dr.

To Profit/ loss

( Being profit/ loss a/c t/f to capital account at the year end)