EVALUATION | TRANSACTIONS | Assets | = | Liabilities + Equity | |---|---|---|---| | 1. | | | | | 2. | | | | | 3. | | | | | 4. | | | | | 5. | | | | | 6. | | | | | 7. | | | | | 8. | | | | | 9. | | | | | 10. | | | | Business Transactions 1. Owner invested 20,000 in the business. 2. Owner borrowed 30,000 from the bank as additional investment in the business. 3. The business purchased printer amounting to 1,000. 4. Rendered services and received the full amount in cash, 500. 5. Rendered services on account (receivable from customer), 750. 6. Purchased office supplies on account (payable to supplier), 200. 7. Had some equipment repaired for 400, to be paid after 15 days. 8. Mr. Alex, the owner, withdrew 5,000 cash for personal use. 9. Paid one-third of the loan obtained in transaction #2. 10. Received customer payment from services in transaction #5.
Answer (1)
To analyze the business transactions for the company, we'll use the basic accounting equation, which is:
Assets = Liabilities + Equity
Let's go through each transaction step-by-step to see how it affects the accounting equation:
Owner invested $20,000 in the business.
Assets increase by $20,000 (cash).
Equity increases by $20,000 (owner's equity contribution).
20000 = 0 + 20000
Owner borrowed $30,000 from the bank as additional investment in the business.
Assets increase by $30,000 (cash).
Liabilities increase by $30,000 (bank loan).
50000 = 30000 + 20000
The business purchased a printer costing $1,000.
Assets remain the same (cash decreases by $1,000, equipment increases by $1,000).
No change in Liabilities or Equity.
50000 = 30000 + 20000
Rendered services and received the full amount in cash, $500.
Assets increase by $500 (cash).
Equity increases by $500 (revenue).
50500 = 30000 + 20500
Rendered services on account (receivable from customer), $750.
Assets increase by $750 (accounts receivable).
Equity increases by $750 (revenue).
51250 = 30000 + 21250
Purchased office supplies on account (payable to supplier), $200.
Assets remain the same (office supplies increase by $200, no immediate cash impact).
Liabilities increase by $200 (accounts payable).
51250 = 30200 + 21050
Had some equipment repaired for $400, to be paid after 15 days.
No immediate change in Assets as expense will reduce future earnings.
Liabilities increase by $400 (accounts payable).
51250 = 30600 + 21050
Mr. Alex, the owner, withdrew $5,000 cash for personal use.
Assets decrease by $5,000 (cash).
Equity decreases by $5,000 (owner's withdrawal).
46250 = 30600 + 16050
Paid one-third of the loan obtained in transaction #2.
Assets decrease by $10,000 (cash).
Liabilities decrease by $10,000 (bank loan).
36250 = 20600 + 16050
Received customer payment from services in transaction #5.
* Assets increase by $750 (cash), and accounts receivable decreases by $750.
* No change in Liabilities or Equity as revenue was already recognized.
\[36250 = 20600 + 16050\]
In summary, by following the accounting equation, we can see how each transaction affects assets, liabilities, and equity balances, ensuring they remain balanced. This process is crucial in tracking a business's financial position.
