Question

What is the dollar effect on the accounting equation (increase or decrease assets, liabilities, or stockholders' equity) from the following independent transactions?

1) Increase assets
2) Decrease assets
3) Increase liabilities
4) Decrease liabilities
5) Increase stockholders' equity
6) Decrease stockholders' equity

Answer 1

The dollar effect on the accounting equation depends on the type of transaction. An increase in assets or liabilities would increase their respective values, while a decrease would decrease their values. An increase in stockholders' equity would increase its value, while a decrease would decrease its value.

Step-by-step explanation:

The dollar effect on the accounting equation depends on the type of transaction. Here is the effect of each transaction:

1. Increase assets: This would increase the assets on the accounting equation. For example, if a company purchases a new piece of equipment for cash, it would increase the asset value on the balance sheet.
2. Decrease assets: This would decrease the assets on the accounting equation. For example, if a company sells inventory for cash, it would decrease the asset value on the balance sheet.
3. Increase liabilities: This would increase the liabilities on the accounting equation. For example, if a company takes out a loan, it would increase the liability value on the balance sheet.
4. Decrease liabilities: This would decrease the liabilities on the accounting equation. For example, if a company pays off a loan, it would decrease the liability value on the balance sheet.
5. Increase stockholders' equity: This would increase the stockholders' equity on the accounting equation. For example, if a company earns net income, it would increase the retained earnings value on the balance sheet.
6. Decrease stockholders' equity: This would decrease the stockholders' equity on the accounting equation. For example, if a company pays dividends to shareholders, it would decrease the retained earnings value on the balance sheet.