Question

Paid $4,200 for utilities. Performed services for $21,000 on account. Received $13,000 from charge account customers. Paid salaries of $9,000 to employees. Paid $16,000 to a creditor on account. Owner invested $180,000 in the business. Purchased $53,400 of supplies on account. Purchased equipment for $42,000 cash. Paid $12,000 for rent (in advance). Performed services for $15,600 cash.

Indicate the impact of each of the transactions on the fundamental accounting equation (Assets = Liabilities + Owner's Equity) by placing a ""to indicate an increase and a "D" to indicate a decrease. The first transaction is entered as an example. (If transaction causes one account to increase and another to decrease within the same classification of the accounting equation, select 1/D.)
Transaction Assets = Liabilities + Owner's Equity
1 D = D
2. 3. 4. 5. 6. 7. 8. 9. 10.

Answer 1

1. Cash (Assets) DECREASES

Expenses INCREASE

Owner’s Equity DECREASES.

2. Accounts Receivable (Assets) INCREASES

Revenue INCREASES

Owner’s Equity INCREASES

3. Cash (Assets) INCREASES.

Accounts Receivable (Assets) DECREASES.

4. Cash (Assets) DECREASE

Expenses INCREASE

Owner’s Equity DECREASES

5. Cash (Assets) decreases.

Accounts Payable (Liabilities) decreases.

6. Assets INCREASE

Owner’s Equity INCREASES

7. Supplies (Assets) INCREASES.

Accounts Payable (Liabilities) INCREASES

8. Equipment (Assets) INCREASES

Cash (Assets) DECREASES

9. Prepaid Rent (Assets) INCREASES

Cash (Assets) DECREASES

10. Cash (Assets) INCREASE

Revenue INCREASES

Owner’s Equity INCREASES

Explanation:

To Indicate the impact of each of the transactions on the fundamental accounting equation

1. Paid the amount of $4,200 for utilities.

Cash (Assets) DECREASES

Expenses INCREASE

Owner’s Equity DECREASES.

2. Performed services for the amount of $21,000 on account.

Accounts Receivable (Assets) INCREASES

Revenue INCREASES

Owner’s Equity INCREASES

3. Received the amount of $13,000 from charge account customers.

Cash (Assets) INCREASES.

Accounts Receivable (Assets) DECREASES.

4. Paid salaries of the amount of $9,000 to employees.

Cash (Assets) DECREASES

Expenses INCREASE

Owner’s Equity DECREASES

5. Paid the amount of $16,000 to a creditor on account.

Cash (Assets) decreases.

Accounts Payable (Liabilities) decreases.

6. Owner invested the amount of $180,000 in the business.

Assets INCREASE.

Owner’s Equity INCREASES

7. Purchased the amount of $53,400 of supplies on account

Supplies (Assets) INCREASES.

Accounts Payable (Liabilities) INCREASES

8. Purchased equipment for the amount of $42,000 cash

Equipment (Assets) INCREASES

Cash (Assets) DECREASES

9. Paid the amount of $12,000 for rent (in advance).

Prepaid Rent (Assets) INCREASES

Cash (Assets) DECREASES

10. Performed services for the amount of $15,600 cash

Cash (Assets) INCREASE

Revenue INCREASES

Owner’s Equity INCREASES