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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred.

(a) Invested cash in business, $18,000.

(b) Bought office supplies for $4,600: $2,000 in cash and $2,600 on account.

(c) Paid one-year insurance premium, $1,200.

(d) Earned revenues totaling $3,300: $1,300 in cash and $2,000 on account.

(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $2,300.

(f) Paid office rent for the month, $750.

(g) Withdrew cash for personal use, $100.

REQUIRED

Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (CapitalDrawing + RevenuesExpenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance.

To determine

Show the effect of each transaction on the individual accounts and demonstrate that the accounting equation remained in balance.

Explanation

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners.

The effects of each transaction on the accounts of accounting equation are given bellow:

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