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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 David Segal started a business. During the first month (October 20--), the following transactions occurred.

(a) Invested cash in the business, $15,000.

(b) Bought office supplies for $3,800: $1,800 in cash and $2,000 on account.

(c) Paid one-year insurance premium, $1,000.

(d) Earned revenues amounting to $2,700: $1,700 in cash and $1,000 on account.

(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $1,800.

(f) Paid office rent for the month, $650.

(g) Withdrew cash for personal use, $150.

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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