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Accounting, Finance, SPSS
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Math Problem
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# Math Problem: Accounting Equation (Math Problem Sample)

Instructions:

Show the effect of the above transactions on the accounting equation

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Task 1: Show the effect of the above transactions on the accounting equation (10 marks)
Usually, any transaction involving a business has a significant influence on the accounting equation. Any incentives to influence changes in the transaction variables, results to satisfying the equation irrespective of the alteration
Accounting Equation
Assets = Capital + Liabilities
Note:
DR â€“ Debit
CR â€“ Credit
Bal b/f â€“ balance brought forward or opening balance
Bal c/f â€“ balance carried forward or closing balance
* July 1st Dimos invested \$ 16,000 cash in the business
DR Capital Ledger a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

Â

Â

Â

Â

01-06-14

cash

Â

16000

30-07-14

Bal c/f

16000

Â

Â

Â

Â

Â

Â

Â

16000

Â

Â

Â

16000

Â

Â

Â

Â

01-08-14

Bal b/f

Â

16000

Before Laura Dimos started the Consulting Firm the equation was
Capital + Liabilities = Assets i.e. [0 + 0 = 0]
But after starting the firm she invested \$16000 on July 1stm, the firmâ€™s value increased from Zero to \$16000. This was the startup capital, hence
[\$16000 + 0 = \$16000] â€“ The equation was fulfilled
* July 2nd Paid \$ 1600 for office rent for the month
DR Rent Ledger a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

02-07-14

cash

Â

1600

Â

Â

Â

Â

Â

Â

Â

Â

Â

bal c/f

Â

1600

Â

Â

Â

1600

Â

Â

Â

1600

01-08-14

bal b/f

Â

1600

Â

Â

Â

Â

Rent is an expense to the firm. The rent value is transferred to the income statement as an operating expense. This transaction had no influence on either capital or liability but since it was paid on cash it reduced the amount of capital from \$16000 to \$14400.
Hence; Capital + Liabilities = Assets. The equation was fulfilled
[(\$16000+0)-\$1600] = [Cash \$14400]
* July 3rd Purchased \$1000 supplies on credit
DR Purchase Ledger a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

03-07-14

creditors

Â

1000

Â

Â

Â

Â

Â

Â

Â

Â

30-07-14

bal c/f

Â

1000

Â

Â

Â

1000

Â

Â

Â

1000

01-08-14

bal b/f

Â

1000

Â

Â

Â

Â

In this transaction, the supplies made on credit increased the firmâ€™s liability from zero to \$1000 as well as the firmâ€™s asset by \$1000. Such transaction had no effect on the capital or the cash.
Hence; Capital + Liabilities = Assets
[(\$16000+0)-\$1600]+ \$1000 = [Cash \$14400] + \$1000
The equation was fulfilled
* July 9th Received \$ 6000 cash for services provided
DR Sales Ledger a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

Â

Â

Â

Â

09-07-14

cash

Â

6000

Â

Â

Â

Â

15-07-14

cash

Â

6600

30-07-14

bal c/f

Â

12600

Â

Â

Â

Â

Â

Â

Â

12600

Â

Â

Â

12600

Â

Â

Â

Â

01-08-14

bal b/f

Â

12600

From these sale (receipt) transactions, the firmâ€™s available cash increased from Cash (14400) by (\$6000) to \$20400. The transaction had no influence on capital and supply.
Hence; Capital + Liabilities = Assets
[(\$16000+0)-\$1600]+ [Services \$6000] = [Cash 20400+ \$1000]
The equation was fulfilled
* July 15th Performed \$ 6600 of services on account
July 23rd received cash payment of \$ 4000 for services provided on account
The recipient of this service transaction is a debtor. The debtor may be valued as an asset. Such asset has no influence on the capital or liability or cash available. In such case the equation was fulfilled
Debtors Ledger acc
DR

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

15-07-14

sales

Â

6600

23-07-14

cash

Â

4000

Â

Â

Â

Â

30-07-14

bal c/f

Â

2600

Â

Â

Â

6600

Â

Â

Â

6600

01-08-14

bal b/f

Â

2600

Â

Â

Â

Â

* July 17th Paid \$ 6000 for employee salaries
Salaries Ledger a/c
DR Salaries Ledger a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

17-07-14

cash

Â

6000

Â

Â

Â

Â

Â

Â

Â

Â

30-07-14

bal c/f

Â

6000

Â

Â

Â

6000

Â

Â

Â

6000

01-08-14

bal b/f

Â

6000

Â

Â

Â

Â

The salaries reduced the capital invested in the firm. However, this transaction conformed to the equation.
The equation was fulfilled
* July 20th Paid for the supplies purchased on account
This transaction reduced the available cash. The transaction had an influence on the liabilities and not the capital
July 29th purchased office equipment for \$ 4800 on account
This transaction increased the liabilities as well as the asset and not the capital.
Creditors Ledger
DR a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

20-07-14

cash

Â

1000

03-07-14

purchases

Â

1000

Â

Â

Â

Â

29-07-14

equipment

Â

4800

30-07-14

bal c/f

Â

4800

Â

Â

Â

Â

Â

Â

Â

5800

Â

Â

Â

5800

Â

Â

Â

Â

01-08-14

bal b/f

Â

4800

* July 26th Borrowed \$ 10000 from the bank as a loan
This increases the cash and the non-current liabilities.
The equation was fulfilled
Loan Ledger
DR a/c

CR

Date

Particulars

Folio

Amount

Date

Particulars

Folio

Amount

Â

Â

Â

Â

20-07-14

cash

Â

10000

30-07-14

bal c/f

Â

10000
<...
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