Question

Tiny Town Kennel earns service revenue by caring for the pets of customers. Tiny Town Kennel is organized as a sole proprietorship and owned by Earle Martin . During the past​ month, Tiny Town Kennel has the following​ transactions: LOADING... ​(Click the icon to view the​ transactions.) Indicate the effects of the business transactions on the accounting equation for Tiny Town Kennel. Transaction​ (a) is answered as a guide. a. Received $ 520 cash for service revenue earned.​ (Transaction (a) is answered as a​ guide.) a. Increase asset (Cash) ; Increase equity (Service Revenue) b. Paid $ 325 cash for salaries expense.

Answer 1

Paid $325 cash for salaries expense ⇒ Decrease asset (Cash); Decrease in Equity (Expenses)

Assets are reduced because the money used to pay for the salaries came from cash and cash is an asset. Assets will therefore be credited.

Equity also reduces because expenses come out operating income which is part of Equity. Equity will be debited as it is debited when it decreases.