Question

The Copy Center had the transactions listed below during the month of June. TRANSACTIONS John Amos started the business with a cash investment of $59,000. Purchased equipment for $21,500 on credit. Performed services for $3,000 in cash. Purchased additional equipment for $4,500 in cash. Performed services for $5,000 on credit. Paid salaries of $4,400 to employees. Received $3,100 cash from charge account customers. Paid $12,600 to a creditor on account. Show how each transaction would be recorded in the accounting equation. (Enter decreases to account balances with a minus sign.)

Answer 1

Step-by-step explanation:

‘Balance Sheet’ shows the liabilities, assets and equity of a company at a particular point of time. Assets are the items that the company own, liability is the obligation of the company and equity is the net assets, i.e., the difference between the assets and the liabilities.

The effect of each transaction on accounting equation would be:

1. John started business with investment of $59,000. This would increase cash as well as owner's equity of the business.
2. Equipment (asset) as well as accounts payable (liability) would increase by $21,500.
3. Services performed would increase the revenue for the period. Thus, cash and equity would increase by $3,000.
4. Equipment would increase whereas cash would decrease by $4,500.
5. Services performed would increase the revenue for the period. Thus, accounts receivable as well as owners' equity would increase by 5,000.
6. Salaries expense would increase. Thus, the owners' equity and cash would decrease by $4,400.
7. The amount of $3,100 has been collected. Thus, the cash would increase and accounts receivable would decrease by $3,100.
8. Cash is paid to a creditor. Thus, the creditors as well as cash would decrease by $12,600.