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Chapter 2, Problem 2A
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Explain the manner in which the accounting equation remains in balance if there are two credits and one debit on the left side of the equation and the other credit on the right side of the equation.

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College Accounting (Book Only): A Career Approach
College Accounting (Book Only): A Career Approach
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ISBN: 9781337280570
Author: Scott, Cathy J.
Publisher: South-Western College Pub
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College Accounting (Book Only): A Career Approach
College Accounting (Book Only): A Career Approach
T Accounts, Debits And Credits, Trial Balance, And Financial Statements. 2A
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  • A fellow accounting student has difficulty understanding how the fundamental accounting equation stays in balance when an entry with one debit and two credits is recorded. Consider, for example, that a business bought equipment for $5,000, paid $2,000 in cash, and placed the remainder on account. This means that there are two credits and one debit—one debit and one credit on the left side of the equation and the other credit on the right side of the equation. In at least 100 words, explain to your fellow student how the equation stays in balance.
    Jetson Corp. performed services for a customer worth $500 and the customer will pay for those services next month. When the transaction was journalized, however, Jetson's accountant debited the "Cash" account and credited the "Service Revenue" account for $500 each. Question: As a result of this error, which of the following statements is/are true? (check all that apply) Select one or more: a. Total debits and total credits will still equal but the balance sheet equation will not be satisfied. b. Total debits and total credits will still equal and the balance sheet equation will be satisfied. c. The "Accounts Receivable" account balance will be too low (understated) while the "Cash" account balance will be too high (overstated). d. The "Accounts Receivable" account balance will be too low (understated) while the "Service Revenue" account balance will be too high (overstated).
    1. Suppose a business receives a bill for services rendered from one of itssuppliers. The business will pay the supplier next month. When the businessreceives the bill from its supplier, explain how this affect the accounting equation in terms of increasing or decreasing assets, liabilities, or owner’s equity? 2. Suppose equipment is sold for cash in an amount equal to the cost of theequipment recorded on the books. How does this sale affect the accountingequation in term of increasing or decreasing assets, liabilities or owner’s equity?
  • The accounting equation is often described as being very important in accounting. Explain the purpose of the accounting equation and state two different forms or ways in which it can be written. Distinguish between assets and liabilities and provide three (3) examples of each to support your arguments. Distinguish between income and expenses and provide three (3) examples of each to support your arguments. Suppose a business receives a bill for services rendered from one of its suppliers. The business will pay the supplier next month. When the business receives the bill from its supplier, explain how this affect the accounting equation in terms of increasing or decreasing assets, liabilities, or owner’s equity? Suppose equipment is sold for cash in an amount equal to the cost of the equipment recorded on the books. How does this sale affect the accounting equation in term of increasing or decreasing assets, liabilities or owner’s equity?
    Choose the correct Answer Which of the following does not describe accounting? Language of business Useful for decision making Is an end rather than a mean to an end? Financial accounting and accounting systems   Should the $500 entry to the Cash account be a debit? Yes No Should the $500 entry to Mary Smith, Capital be a debit? Yes No In Septemberwhen the company receives the $2,000 from the customer, which account should the company credit? Cash Accounts Receivable Service Revenue External reporting is the result of? Financial accounting Management accounting Cost accounting Social accounting
    Show that the accounting equation is satisfied after taking into consideration each of the following transactions in the books of Mr. N 1. Started business with capital 1,00,000 2. Bought furniture 25,000 3. Bought goods for cash 20,000 4. Bought goods from Ram on Credit 5,000 5. Sold goods for cash for 15,000 6. Sold goods to Shyam on credit 8,000 7. Paid cash to Ram 4,000 8. Received cash from Shyam 5,000 9. Paid Cash into Bank 25,000 10. Withdrawn from bank 10,000
  • All of the following are true regarding journal entries except? Select one: a. Journal entries provide account balances b. The debited account titles are listed first c. Journal entries show the effects of transactions d. Each journal entry should begin with a date   When the owner withdraws money from the business for personal use -Which of the following has correct effect on accounting equation? Select one: a. Expense increase and Cash decrease b. Cash increase and Capital increase c. Cash decrease and Capital decrease d. Income increase and Cash decrease       Sales made to Ahmed on credit should be debited to? Select one: a. Cash A/C b. Account Receivable A/C c. Sales A/C d. Account Payable A/C     Which of the following is a correct form of the Accounting Equation? Select one: a. Assets = Liabilities + Capital b. Assets + Capital = Liabilities c. None of the above d. Assets + Liabilities = Capital
    1. Are the following events recorded in the accounting records? Do they have an affect on the basic accounting question? a. The owner of the company dies.  b. Supplies are purchased on account c. An employee is fired. d. The owner of the business withdraws cash from the businesses for personal use.    2. Indicate how the following business transactions affect the basic accounting equation (what account increase and decrease)  a. Paid cash janitorial services  b. Purchased equipment for cash c. Invested cash in the business  d. Paid accounts payable in full   3. Carla Enterprises had a capital balance of $182000 at the beginning of the period. At the end of the accounting period, the capital balance was $194000. Assuming no additional investment or withdrawals during the period, what is the net income for the period?
    Identify the explanation from a through j below that best describes each transaction 1 through 5 above and enter it in the blank space in front of each numbered transaction. a. The company purchased office furniture for $8,000 cash. b. The company received $40,000 cash from a bank loan. c. The owner invested $1,000 cash in the business. d. The owner invested $40,000 cash in the business. e. The company purchased office supplies for $3,000 by paying $2,000 cash and putting $1,000 on credit. f. The company billed a customer $6,000 for services provided. g. The company purchased office furniture worth $8,000 on credit. h. The company provided services for $1,000 cash. i. The company sold office supplies for $3,000 and received $2,000 cash and $1,000 on credit. j. The company provided services for $6,000 cash.
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