Question

Complete the following table by indicating the effects of the following transactions on the balance sheet. Do so by recording an I for an increase, a D for a decrease, and NC for no change in assets, liabilities, and shareholders' equity for each transaction. 1. Acquired inventory for cash. 2. Purchased equipment on credit. 3. Earned revenue (receiving a promise from the customer to pay at a later date) by providing consulting services. 4. Received cash by selling stock. 5. Paid for the equipment purchased in number 2 above. Transaction Assets Liabilities Shareholders' Equity 1. 2. اليا 4. 5.

Answer 1

Transaction	Assets	Liabilities	Shareholders Equity
1. Acquired inventory for cash	NC	NC	NC
2. Purchased equipment on credit	I	I	NC
3. Earned Revenue by providing consulting services	I	NC	I
4. Received cash by selling stock	I	NC	I
5. Paid for the equipment purchased in number 2 above	D	D	NC

Explanation

Owners Equity= Total Assets- Total Liabilities

Transaction No.1

Entry for acquiring inventory for cash

Inventory a/c------Dr

To Cash

So in assets side inventory is increased and cash is decreased so effect is nullify and owners Equity is not not effect

Transaction no.2

Entry is

Equipment a/c ----Dr

To payable for equipment

So in assets side equipment Value is increase and liabilities side payable is increased

This transaction not effect on owners Equity

Transaction no.3

journal entry is

Service provided (sales/revenue) a/c ----Dr

To Trade Receivable (Debitor)

In this transaction profit is earned which is transferred to owner's equity and Trade Receivable is increased in Assets side

Transaction no.4

In this transaction we assumed stocks are sold Market price which more than cost price actually we sale stock only when Market price I s High than cost price

So we increased cash (more than investments) and profit on sale will transfer to owner's equity

Transaction no.5

Journal entry for this transaction is

Payable for equipment a/c------Dr

To Cash

So cash is decreased in assets side and payable for equipment (liability) decrease in Liabilities side

No effect on owners Equity

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