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1 page/≈275 words
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Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Math Problem
Language:
English (U.K.)
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Topic:

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 – Debit
CR – Credit
Bal b/f – balance brought forward or opening balance
Bal c/f – 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

 

 

 

 

01-06-14

cash

 

16000

30-07-14

Bal c/f


16000

 

 

 

 

 

 

 

16000

 

 

 

16000

 

 

 

 

01-08-14

Bal b/f

 

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 firm’s value increased from Zero to $16000. This was the startup capital, hence
[$16000 + 0 = $16000] – 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

 

1600

 

 

 

 

 

 

 

 

 

bal c/f

 

1600

 

 

 

1600

 

 

 

1600

01-08-14

bal b/f

 

1600

 

 

 

 

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

 

1000

 

 

 

 

 

 

 

 

30-07-14

bal c/f

 

1000

 

 

 

1000

 

 

 

1000

01-08-14

bal b/f

 

1000

 

 

 

 

In this transaction, the supplies made on credit increased the firm’s liability from zero to $1000 as well as the firm’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

 

 

 

 

09-07-14

cash

 

6000

 

 

 

 

15-07-14

cash

 

6600

30-07-14

bal c/f

 

12600

 

 

 

 

 

 

 

12600

 

 

 

12600

 

 

 

 

01-08-14

bal b/f

 

12600

From these sale (receipt) transactions, the firm’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
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