Question

Analyze the transactions of a business, organized as a corporation, described below and indicate the effect (Increase, Decrease or No Change) on the basic Accounting Equation components:


Transaction Details Assets = Liabilities + Shareholders' Equity
1. Received cash for services rendered.
2. Purchased office equipment on credit.
3. Paid employees salaries.
4. Received cash from customer in payment on account.
5. Paid telephone bill for the month.
6. Paid for office equipment purchased in transaction 2.
7. Purchased office supplies on credit.
8. Dividends were paid.
9. Obtained a loan from the bank.
10. Billed customers for services rendered.

Answer 1

Answer:

1. Received cash for services rendered.

Assets increase (more cash).

Shareholders' equity increase (more revenue).

Liabilities (no change).

2. Purchased office equipment on credit.

Assets increase (more equipment).

Shareholders' equity decrease (more operating expenses).

Liabilities increase (more accounts payable).

3. Paid employees salaries.

Assets decrease (less cash).

Shareholders' equity decrease (more operating expenses).

Liabilities decrease (less wages payable).

4. Received cash from customer in payment on account.

Assets increase (more cash).

Shareholders' equity increase (more revenue).

Liabilities (no change).

5. Paid telephone bill for the month.

Assets decrease (less cash).

Shareholders' equity decrease (more operating expenses).

Liabilities decrease (less utilities payable).

6. Paid for office equipment purchased in transaction 2.

Assets decrease (less cash).

Shareholders' equity decrease (more operating expenses).

Liabilities decrease (less accounts payable).

7. Purchased office supplies on credit.

Assets (no change).

Shareholders' equity decrease (more operating expenses).

Liabilities increase (more accounts payable).

8. Dividends were paid.

Assets decrease (less cash).

Shareholders' equity decrease (less retained earnings).

Liabilities (no change).

9. Obtained a loan from the bank.

Assets increase (more cash).

Shareholders' equity (no change).

Liabilities increase (more loans payable).