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Analyzing the Effect of Transactions on the Balance Sheet Following the example in a
Analyzing the Effect of Transactions on the Balance Sheet
Following the example in a. below, indicate the effects of transactions b. through i. on assets, liabilities, and equity, including identifying the individual accounts affected.
a. Paid cash to acquire a computer for use in office.
ANSWER: Increase assets (Office Equipment)
Decrease assets(Cash)
b. Rendered services and billed client.
c. Paid cash to cover rent for this period.
d. Rendered services to the client for cash.
e. Received amount due from the client in b.
f. Purchased an office desk on account.
g. Paid cash to cover this period's employee salaries.
h. Paid cash to cover desk purchased in f.
i. Declared and paid a cash dividend.
Expert Solution
Analyzing the Effect of Transactions on the Balance Sheet
a. Paid cash to acquire a computer for use in office.
ANSWER: Increase assets (Office Equipment), Decrease assets(Cash)
b. Rendered services and billed client.
ANSWER: Increase assets (Accounts receivable), Increase equity (Retained earnings)
c. Paid cash to cover rent for this period.
ANSWER: Decrease assets (Cash), Decrease equity (Retained earnings)
d. Rendered services to the client for cash.
ANSWER: Increase assets (Cash), Increase equity (Retained earnings)
e. Received amount due from the client in b.
ANSWER: Increase assets (Cash), Decrease assets (Accounts receivable)
f. Purchased an office desk on account.
ANSWER: Increase assets (Office Equipment), Increase liabilities (Accounts payable)
g. Paid cash to cover this period's employee salaries.
ANSWER: Decrease assets (Cash), Decrease equity (Retained earnings)
h. Paid cash to cover desk purchased in f.
ANSWER: Decrease liabilities (Accounts payable), Decrease assets (Cash)
i. Declared and paid a cash dividend.
ANSWER: Decrease assets (Cash), Decrease equity (Retained earnings)
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