Question

Company borrows $15,000 signing a note payable to the bank that is due in three months.

1.Does a transaction exist?
2.Examine it for accounts affected.
3.Classify each account affected.
4.Identify direction and amount.
5.Ensure the equation still balances.

Answer 1

Yes, a transaction exists where the company borrowed $15,000 from the bank by signing a note payable. The accounts affected are the Note Payable and Cash accounts, which are classified as a liability and an asset respectively. The transaction increases both the Note Payable and Cash accounts by $15,000, and the accounting equation still balances.

Step-by-step explanation:

1. Yes, a transaction exists. The company borrowed $15,000 signing a note payable to the bank, which is a financial transaction.

2. The accounts affected are:

• Note Payable (increased)
• Cash (increased)

3. The accounts affected are classified as liabilities and assets respectively.

4. The direction of the transaction is an increase (+) in both Note Payable and Cash accounts by $15,000.

5. The accounting equation still balances because the increase in liabilities (Note Payable) is equal to the increase in assets (Cash).