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Explain how transactions affect the accounting equation

Accounting Dec 16, 2020

Explain how transactions affect the accounting equation.

Expert Solution

Transaction are recorded bearing in mind that accounting equation. Normal balances of assets is debit while liabilities and equity is credit. For every increase in asset, it is recorded as debit while a decrease in asset is credit. On the other hand, increase in liabilities and equity is recorded as credit and debited when it decreases. The total of liabilities and equity must always be equal to the total asset because for every increase in asset is an increase in liability or equity or a decrease in other asset account and vice versa

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