Question

Indicate the effects on the accounting equation of the following business transactions of Pilgrim Service Corporation for b) to d) below. Use proper account titles. Transaction a) is answered as a guide. a) Received cash from Maxwell Jones; issued common stock to him. Answer: Increase asset (Cash); Increase equity (Common Stock) b) Received cash from a customer on accounts receivable. c) Paid cash dividends to the stockholder. d) Paid cash on accounts payable. W HTML Editor B I A - A - I E331 3xx, xXE T 12pt Paragra

Answer 1

b.

Increase in the asset (cash) and decrease in accounts receivable (asset)

JE:

Cash A/c Dr

Accounts receivable A/c

c.

Decrease in cash(asset) and decrease in the Retained earnings(Equity)

JE:

Retained earnings A/c Dr

Cash A/c

d.

Decrease in Cash (asset) and decrease in Accounts payable (liability)

JE:

Accounts payable A/c Dr

Cash A/c