Refresh your understanding on Debit And Credit Rules/Double Entry/Accounting Equation &
The Accounting Equation in relationship to the Balance Sheet
Worked Examples on Accounting Equation:
1.0 What effect do the following transactions have on owner's equity(capital)?
(a) The owner invested $100,000 into the business
(b) She bought equipemnt on accounts,$30,000
(c) She paid part of the bill owed to the creditors
(d) She received $30,000 as fees
(e) She paid salaries for the month $10,000
(f) She withdrew $12,000 from the business
(g) She paid rent for the month $3,000
(h) Inventory of supplies increased $5,000 during the month
Answers to the above question on Increase/(Decrease) on owner's equity(capital)
1.0
(a) Increase (b) No effect (c) No effect (d) Increase (e) Decrease (f) Decrease
(g) Decrease (h) Decrease
_____________________________________________________
2.0 Fill in the blank:
(a) The accounting equation is ______=______+______
(b) Income increases net assets and also ________
(c) A withdrawal of cash reduces cash and _______
(d) An investment in the business increases______ & ______
(e) The difference between assets and liabilities is _________
(f) Money owed by an outsider is an _________
(g) Items owned by a business that have money value are known as ______
(h) If you buy "on account", we create a __________
Answer to filling in the blank for Question 2
(a) assets, liabilities,capital (b) capital (c) capital (d) assets, capital
(e) capital (f) asset (g) assets (h) liability
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