Question

Kennel earns service revenue by caring for the pets of customers. Tiny Town Kennel is organized as a sole proprietorship and owned by Earle Martin. During the past​ month, Tiny Town Kennel has the following​ transactions:

a) Received $520 cash for service revenue earned.
b) Paid $325 cash for salaries expense.
c) Martin contributed $1,000 to the business in exchange for capital.
d) Earned $640 for service revenue, but the customer has not paid Tiny Town Kennel yet.
e) Received utility bill of $85, which will be paid next month.
f) Martin withdrew $100 cash.

Indicate the effects of the business transactions on the accounting equation for Tiny Town Kennel.

Transaction (a) is answered as a guide. a. Increase asset (Cash): Increase equiy (Service Revenue)

Answer 1

Transaction (a) increases assets and equity, while the remaining transactions have various effects on the accounting equation.

Step-by-step explanation:

Transaction (a) has already been answered. Let's analyze the effects on the accounting equation for the remaining transactions:

1. (b) Decrease asset (Cash): Decrease equity (Salaries Expense)
2. (c) Increase asset (Cash): Increase equity (Capital)
3. (d) Increase asset (Accounts Receivable): Increase equity (Service Revenue)
4. (e) No effect on the accounting equation since it is a liability that will be paid in the future.
5. (f) Decrease asset (Cash): Decrease equity (Withdrawals)

By analyzing the transactions, we can see the effects on the accounting equation for each transaction, which allows us to track the changes in the financial position of Tiny Town Kennel.

Answer 2

a) Increase asset (Cash): Increase equity (Service Revenue) - GUIDE

b) Decrease equity (Salaries): Decrease asset (Cash)

c) Increase asset (Cash): Increase equity (Capital)

d) Increase asset (Receivable Accounts): Increase equity (Service Revenue)

e) Decrease equity (Utility): Increased liabilities (Others payable accounts)

f) Decrease equity (Capital): Decrease assets (Cash)

Step-by-step explanation:

Accounting Equation Formula :

Assets = Liabilities + Equity

According to the formula transactions must be recorded as follows:

DEBIT: Asset increases, Liabilities decreases, and Equity decrease.

CREDIT: Asset decreases, Liabilities increases, and Equity increase.