Question

ament CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Analyze the transactions of a business organized as a proprietorship described below and indicate whether the transaction increased, decreased or increased and decreased the accounting equation. Owner's Equity Assets Liabilities Decreased Increased 1. Received cash for services rendered Increase Decreased - 2. Purchased office equipment on credit Increased Decreased 3. Paid employees salaries. Decreased increased Received cash from customer in payment on account Decreased d 5. Paid telephone bill for the month. de Decreased 6. Paid for office equipment purchased in transaction 2 Decreased 7. Purchased office supplies on credit. Increased and decreased Decreased Increased 8. Owner withdrew cash for personal expenses Decreased Increased 9. Obtained a loan from the bank Increased

Answer 1

		Assets	=	Liabilities	+	Owner's Equity
1.	Received cash for services rendered	Increased				Increased
2.	Purchased office equipment on credit	Increased	Increased
3.	Paid employees' salaries	Decreased		Decreased
4.	Received cash from customer in payment on account	Increased and decreased
5.	Paid telephone bill for the month	Decreased		Decreased
6.	Paid for office equipment purchased in transaction 2	Decreased	Decreased
7.	Purchased office supplies on credit		Increased	Decreased
8.	Owner withdrew cash for personal expenses	Decreased		Decreased
9.	Obtained loan from bank	Increased	Increased
10.	Billed customer for services rendered	Increased		Increased
	Working Notes & Explanations
1.	Receipt of cash would increase the current assets hence asset balance
	Service revenue will have a positive effect on profits and result in increase in retained earnings
	and hence increase in owner's equity
2.	Purchase of office on credit would result in increase in the fixed assets and also increase in the
	accounts payable.
3.	Payment of employees salaries would result in decrease in cash and hence decrease in assets
	Salary expense will have a negative effect on profits and result in decrease in retained earnings
	and hence decrease in owner's equity
4.	Receipt of cash from customer would result in increase in cash and simultaneously decrease in
	accounts receivable.Since both are assets, it would result in both increase and decrease in
	assets
5.	Payment of telephone bills would result in decrease in cash and hence decrease in assets
	Telephone expense will have a negative effect on profits and result in decrease in retained
	earnings and hence decrease in owner's equity
6.	Payment for office equipment purchased on credit would result in decrease in cash and hence
	decrease in assets. It would also result in decrease in accounts payable,hence decrease in
	liabilities
7.	Purchase of office supplies on credit would result in increase supplies which is a current asset
	Hence, it would result in increase in assets.
	Simultaneously, it would result in increase in account payable and hence, increase in liabilities.
8.	Withdrawal of cash for personal expenses would result in decrease in cash balance and hence
	decrease in assets.Withdrawal would also result in dilution of the owner's capital,hence there
	would be a decrease in owner's equity
9.	On obtaining loan from bank,the cash and hence assets would increase.It would also increase
	the long term liability against bank loan payable.As a result the Liability would increase.
10.	Since,the service has been rendered on accounts,accounts receivable and hence the assets
	would increase,
	Service revenue will have a positive effect on profits and result in increase in retained earnings
	and hence increase in owner's equity