Question

The following transactions occur for the Hamilton Manufacturers. (a) Provide services to customers on account for $4,800. (b) Purchase equipment by signing a note with the bank for $10,600. (c) Pay advertising of $1,400 for the current month. Analyze each transaction and indicate the amount of increases and decreases in the accounting equation. (Enter "0" wherever required.) Assets Liabilities Stockholders' Equity 11 + + (a) (b) (c) 1111 +

Answer 1

solution-

1).debtor a/c ---dr. 4800

To service revenue 4800

as the services have been provided and for these services the payment will be recd. so the company in future. so for now the customer is our debtor.

this will increase the asset side becase of addition of debtors and will also lead to increase in stockholders equity as service revenue is the part of income in reserves and surplus which comes under stockholders equity.

2) equipment a/c -----dr. 10600

To notes payable 10600

there will be increase in assets side as purchase of equipment leads to increase in fixed assets and also there will be increse in liabilities due to increase in notes payable.

3) advertisement expense a/c-------dr. 1400

To cash 1400

there will be a decrease in stockholders equity as advertisement expense is an expense which reduces the income of the company and income is the part of reserves and surplus which comes under stockholders equity. There will be decrease in assets as cash is used to pay advertisement expense which reduces the current assets.

	ASSETS	=	LIABILITIES	+	STOCKHOLDERS EQUITY
a.	4800	=	0	+	4800
b.	10600	=	10600	+	0
c.	(1400)	=	0	+	(1400)
total	14000	=	10600	+	3400