Question

Show the effect of the following transactions of Xpanda Stores on the Accounting equation. Use “+"to denote an increase,"-" to denote a decrease and "0" to denote no change to the elements of the equation. Assume that the bank balance is favourable at all times. Follow the example given. Example: Paid for electricity by cheque, R900 Equity R900 Liabilities 0 No. Assets R900 e.g. TRANSACTIONS Purchased stationery on credit from PQ Stationers, R500. 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 nvested R50 000 in a fixed deposit (investment) account at Sen Bank. Interest on credit balance according to the bank statement from Sen Bank amounted to R100. Received a cheque from Sen Bank for a long-term loan that was negotiated, R200 000. A creditor charged Xpanda Stores R50 interest on overdue account.

Answer 1

3.2.1

assets	=	equity	+	liabilities
+R500	=	0	+	+R500

3.2.2

assets	=	equity	+	liabilities
0	=	0	+	0

depositing money will increase the asset in form of bank deposits, but at the same time reduce assets in form of cash.

3.2.3

assets	=	equity	+	liabilities
+R100	=	+R100	+	0

interest income will increase cash and also equity in the form of interest income.

3.2.4

assets	=	equity	+	liabilities
+R200,000	=	0	+	+R200,000

loan will increase cash inflow therby increasing assets. It also creates a liability of loan payable.

3.2.5

assets	=	equity	+	liabilities
0	=	-R50	+	+R50