Question

How would these transactions be shown on a transacton sheet?

a) Investments valued at $299 matured and the proceeds deposited to cash on hand. No gain or loss was recognised on the transaction

b)Equipment costing $676 was acquired by paying $196 and financing the balance by issuing shares to the vendor .

c)term deposits included as part of investments earned interest of $216 which was recieved in full during the year

d)tax instalments of $440 were paid during the year. The tax expense determined at the end of the year was $595. The balance will be paid in the subsequent perion.

Answer 1

The Accounting Equation :

Assets = Liabilities + Owners' Equity.

Assets = Liabilities + ( Common Stock + Retained Earnings)

a. Cash will increase by $ 299, and investments will decrease by $ 299.

One asset increases, another decreases, therefore the right hand side of the equation remains unaffected.

b. Equipment will increase by $ 676, cash will decrease by $ 196, and common stock will increase by $ 480.

Therefore, there will be a net increase to assets by $ 480, and a corresponding increase to owners' equity.

c. As the interest on term deposits is received in cash, cash will increase by $ 216, and interest revenue will increase by $ 216.

Therefore, assets will increase by $ 216, with a corresponding increase in retained earnings.

d. Payment of the tax instalments will reduce cash by $ 440, tax expense will reduce retained earnings by $ 595, and a liability of $ 155 will be recognized as tax payable.

	Assets			Liabilities		Owners' Equity
	Cash	Investments	Equipment	Tax payable		Common Stock	Retained Earnings
a.	+ 299	- 299	0	0		0	0
b.	- 196	0	+ 676	0		+ 480	0
c.	+ 216	0	0	0		0	+ 216
d.	- 440	0	0	+ 155		0	- 595