Accounting equation: assets and liabilities
For each of the following items, give an example of a business transaction that has the described effect on the accounting equation:
Increase an asset and increase a liability.
Increase one asset and decrease another asset.
Decrease an asset and decrease owner's equity.
Decrease an asset and decrease a liability.
Increase an asset and increase owner's equity.
Hints & Tricks:
Invest in a company $10,000 What would the journal entry be?
DR Cash 10,000 (increase assets) CR Capital 10,000 (increase owners equity)
What would be the journal entries when a company pays rent expense $400?
DR Rent Exp 400 (Decrease Owners Equity) CR Cash 400 (Decrease owners equity)
Earned $2,000 in revenue did not receive cash. What would be the journal entries?
DR A/R 2,000 (increase assets) CR REVENUE 2,000 (increase owners equity)
The company purchases supplies paying cash $200
What would the journal entries be?
DR Supplies 200 (Increase Assets) CR Cash 200 (Decrease Assets)
Paid $300 in wages expense
What are the journal entries
DR Wages Exp 300 (Decrease Owners Equity) CR Cash 300 (Decrease Asset)
Purchased equipment on account for $12,000
What are the journal entries?
DR Equipment 12,000 (increase asset) CR A/P 12,000 (increase liability)
The company pays the A/P off. What are the journal entries?- DR A/P 12,000 (decrease liabilities) CR Cash 12,000 (decrease asset)
The owner withdrew $1,000 in cash.
What are the journal entries?
DR Drawing 1,000 (decrease owners equity) CR Cash 1,000 (decrease assets)
The owners equity account is made up of 4 types of accounts
Revenue and Capital increase the Owners Equity account and Expenses and Drawing decrease the Owners Equity account
Receive $500 in cash for revenues earned
DR Cash 500 CR Revenue 500
Invested $10,000 in cash
DR Cash 10,000 CR Capital 10,000
Paid expenses $200
DR Expense 200 CR Cash 200
Withdrew $900 in cash
DR Drawing 900 CR Cash 900
This question has the following supporting file(s):
- Flower Shop.doc
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Solution Summary
The solution gives an example of a business transaction that has the described effect on the accounting equation:
Increase an asset and increase a liability.
Increase one asset and decrease another asset.
Decrease an asset and decrease owner's equity.
Decrease an asset and decrease a liability.
Increase an asset and increase owner's equity.
$2.19 
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- 74719-assets and liabilities.doc
Active since 2003
Responses 2706
Extracted Content from Question Files:
- Flower Shop.doc
Assignment:
For each of the following items, give an example of a business transaction that has the
described effect on the accounting equation:
Increase an asset and increase a liability.
Increase one asset and decrease another asset.
Decrease an asset and decrease owner's equity.
Decrease an asset and decrease a liability.
Increase an asset and increase owner's equity.
What I have:
This is my first time in accounting, never had this is school , so here is my first try.
I used to work, years ago in a flower shop, so I will use it as an example.
Increase an asset and Increase a liability
Buying supplies and hiring an outside delivery person
Increase one asset and decrease another asset
Brought a refrigerator unit (to store flowers) with store profit balance, however decrease
store profits.
Decrease an asset and decrease owner's equity
If the flower shop would only deal with roses only,and did not do any other floral
arrangements, this would lower the equity in the shop itself.
Decrease an asset and decrease a liability
If the flower shop sold and then paid off any business bills from the sale, they would
decrease their assets and also decrease their liabilities as they paid off the bills.
Increase an asset and increase owner's equity
If the flower shop would build a greenhouse, then they will increase their assets and
equity.
Hints & Tricks:
Invest in a company $10,000 What would the journal entry be?
DR Cash 10,000 (increase assets) CR Capital 10,000 (increase owners equity)
What would be the journal entries when a company pays rent expense $400?
DR Rent Exp 400 (Decrease Owners Equity) CR Cash 400 (Decrease owners equity)
Earned $2,000 in revenue did not receive cash. What would be the journal entries?
DR A/R 2,000 (increase assets) CR REVENUE 2,000 (increase owners equity)
The company purchases supplies paying cash $200
What would the journal entries be?
DR Supplies 200 (Increase Assets) CR Cash 200 (Decrease Assets)
Paid $300 in wages expense
What are the journal entries
DR Wages Exp 300 (Decrease Owners Equity) CR Cash 300 (Decrease Asset)
Purchased equipment on account for $12,000
What are the journal entries?
DR Equipment 12,000 (increase asset) CR A/P 12,000 (increase liability)
The company pays the A/P off. What are the journal entries?- DR A/P 12,000 (decrease liabilities)
CR Cash 12,000 (decrease asset)
The owner withdrew $1,000 in cash.
What are the journal entries?
DR Drawing 1,000 (decrease owners equity) CR Cash 1,000 (decrease assets)
The owners equity account is made up of 4 types of accounts
Revenue and Capital increase the Owners Equity account and Expenses and Drawing decrease the
Owners Equity account
Receive $500 in cash for revenues earned
DR Cash 500 CR Revenue 500
Invested $10,000 in cash
DR Cash 10,000 CR Capital 10,000
Paid expenses $200
DR Expense 200 CR Cash 200
Withdrew $900 in cash
DR Drawing 900 CR Cash 900
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