Explore BrainMass

Explore BrainMass

    Accounting equation: assets and liabilities

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    © BrainMass Inc. brainmass.com June 3, 2020, 6:46 pm ad1c9bdddf
    https://brainmass.com/business/accounting-for-liabilities/accounting-equation-assets-and-liabilities-74149

    Attachments

    Solution Preview

    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.

    1) Increase an asset and increase a liability.

    Increase asset by increasing inventory.
    Buying supplies (worth $100) would increase inventory (an asset).
    If you buy these supplies on credit you increase a liability (accounts payables)
    Journal entries:
    Dr Inventory 100 Cr Accounts Payable 100

    Another example from the hints and tips

    Purchased equipment on ...

    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

    ADVERTISEMENT