Question

Purchases $300 of supplies on account.

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

A purchase of $300 of supplies on account does constitute a transaction, affecting 'Supplies' (an asset account) and 'Accounts Payable' (a liability account), with both accounts increasing by $300. The accounting equation remains balanced as increases on both sides are equal.

Step-by-step explanation:

When a student makes a purchase of $300 of supplies on account, there are multiple steps to analyze the transaction within the context of accounting principles. Existence of a transaction: Yes, there is a transaction since there is an exchange of supplies for a promise to pay in the future. Accounts affected: The accounts affected are 'Supplies' and 'Accounts Payable'.

Classification of accounts affected: 'Supplies' is an asset account, and 'Accounts Payable' is a liability account. Direction and amount: The 'Supplies' asset account increases by $300, and the 'Accounts Payable' liability account also increases by $300. Equation balance: The accounting equation (Assets = Liabilities + Equity) remains balanced as both the asset and liability sides of the equation have increased by the same amount, $300.