Question

Identifying effects of transactions using the accounting equation LO PI

Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions.
A. Owner invested $59,000 cash in the company along with equipment that had a $14,000 market value.
B. The company paid $2,000 cash for rent of office space for the month.
C. The company purchased $11,000 of additional equipment on credit (payment due within 30 days).
D. The company completed work for a client and immediately collected the $2,300 cash earned.
E. The company completed work for a client and sent a bill for $7,600 to be received within 30 days.
F. The company purchased additional equipment for $5,800 cash.
G. The company paid an assistant $3,400 cash as wages for the month.
H. The company collected $4,500 cash as a partial payment for the amount owed by the client in transaction e.
I. The company paid $11,000 cash to settle the liability created in transaction c.
J. Owner withdrew $1,200 cash from the company for personal use.
Required:
Enter the impact of each transaction on individual items of the accounting equation.

Answer 1

A. Asset as cash will increase by $59,000, asset in equipment will increase $14,000

B. Asset side in increased and decreased

C. Asset and liability will increase by $11,000

D. Asset will increase

E. Asset will increase

F. Asset will increase and decrease by $5,800

G. Asset will decrease

H. Asset will increase

I. Liability will decrease

J. Asset and capital will decrease by $1,200

Step-by-step explanation:

Accounting equation is Asset = Liabilities + Capital

Accounting equation is affected in business transaction. The transaction in business have different effects some transaction are like hybrid which impacts the multiple accounts balances. There are some transactions which just involve asset side transaction increase and decrease on the same account this will offset the balance and no effect on equation.