Principles of Financial Accounting · free preview

Analyzing Transactions with the Accounting Equation

Every transaction is analyzed by asking which accounts it touches and how each side of the accounting equation changes, so that assets always continue to equal liabilities plus equity after the entry.

1. The analysis question set

The analysis question set

2. Investments and revenue

Investments and revenue

3. Expenses and owner draws

Expenses and owner draws

4. Keeping the equation honest

Keeping the equation honest

5. Buying supplies with cash

A company buys 500 dollars of office supplies, paying cash. How does the accounting equation change?

6. Revenue with partial cash collection

A printer completes a 9,000 dollar job, collecting 3,000 dollars in cash and billing the rest. What is the net effect on assets?

7. Withdrawals versus expenses

The owner withdraws 1,000 dollars in cash for a personal vacation. Which statement about the entry is correct?

8. Collecting a receivable

The printing shop collects the 6,000 dollars a customer owed from an earlier job. What is the effect on the accounting equation?

9. Equation after an investment

A new corporation receives 30,000 dollars in cash from its owner in exchange for common stock. Total assets rise 30,000 dollars, total liabilities are unchanged, and total equity rises by how many dollars? Number only.

10. Missing element

After several transactions, a company shows assets of 42,000 dollars and liabilities of 17,000 dollars. Compute equity in dollars, number only.

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