Question

The following transactions were completed by the company. The company completed consulting work for a client and immediately collected $6,700 cash earned. The company completed commission work for a client and sent a bill for $5,200 to be received within 30 days. The company paid an assistant $2,000 cash as wages for the period. The company collected $2,600 cash as a partial payment for the amount owed by the client in transaction b. The company paid $940 cash for this period's cleaning services. Required: Enter the impact of each transaction on individual items of the accounting equation. (Enter decreases to account balances with a minus sign.)

Answer 1

The impact of each transaction on individual items of the accounting equation is as follows:

1. Cash $6,700 Consulting Revenue $6,700:

Assets (Cash +$6,700) = Liabilities + Equity (Retained Earnings $6,700)

2. Accounts Receivable $5,200 Commission Revenue $5,200:

Assets (Accounts Receivable +$5,200) = Liabilities + Equity (Retained Earnings $5,200)

3. Wages Expense $2,000 Cash $2,000:

Assets (Cash -$2,000) = Liabilities + Equity (Retained Earnings -$2,000)

4. Cash $2,600 Accounts Receivable $2,600:

Assets (Cash +$2,600 Accounts Receivable -$2,600) = Liabilities + Equity

5. Cleaning Expense $940 Cash $940:

Assets (Cash -$940) = Liabilities + Equity (Retained Earnings -$940)

Step-by-step explanation:

a) Data and Calculations:

Accounts affected by each transaction:

1. Cash $6,700 Consulting Revenue $6,700

2. Accounts Receivable $5,200 Commission Revenue $5,200

3. Wages Expense $2,000 Cash $2,000

4. Cash $2,600 Accounts Receivable $2,600

5. Cleaning Expense $940 Cash $940

b) The accounting equation is Assets = Liabilities + Equity. It is the basis of accounting, debit and credit sides of accounts or the double-entry system of accounting. It is always in balance with each business transaction when they are properly recorded in the journals and correctly posted to the general ledger.