Final answer:
The transactions affect the business's assets, liabilities, and owner's equity, each having an impact on the accounting equation. Assets, liabilities, and owner's equity are adjusted accordingly to ensure the equation remains balanced.
Step-by-step explanation:
Analyzing Transactions Under the Accounting Equation
When analyzing transactions under the accounting equation, we must consider how each transaction affects assets, liabilities, and owner's equity. Here are the effects of the given transactions:
Commenced business with cash $500,000: Assets increase by $500,000; Owner's Equity increases by $500,000.
Purchased goods $25,000: Assets decrease by $25,000 (if paid in cash), or Liabilities increase if purchased on credit.
Paid salary $10,000: Assets decrease by $10,000.
Sold goods costing $20,000 at a profit of 25% on the cost: Assets increase by $25,000 (cost plus profit), Cost of Goods Sold (expense) is $20,000, and Owner's Equity increases by $5,000 (profit).
Paid salary in advance $2,000: Assets decrease by $2,000, Prepaid Salary (an asset) increases by $2,000.
Introduced additional capital $10,000: Assets increase by $10,000; Owner's Equity increases by $10,000.
Purchased computer $15,000: Assets decrease by $15,000 (if paid in cash), or Liabilities increase if purchased on credit.
Deposited $50,000 into the bank: This is an internal transaction, shifting funds from one asset account to another, with no overall change in the accounting equation.
The accounting equation remains balanced after each of these transactions, with corresponding changes in either assets, liabilities, or owner's equity to reflect the economic activity of the business.