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For each of the following independent transactions, indicate whether there was an increase, a decrease, or no impact for each financial statement element. square square square [Select] [Select ] square square [Select ] square square square [Select ] [Select ] [Select] square

Question

For each of the following independent transactions, indicate whether there was an increase, a
decrease, or no impact for each financial statement element.
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For each of the following independent transactions, indicate whether there was an increase, a decrease, or no impact for each financial statement element. square square square [Select] [Select ] square square [Select ] square square square [Select ] [Select ] [Select] square

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HenriettaElite · Tutor for 8 years

Answer

<p> </p><br />Transaction A <br />- Assets: decrease <br />- Liabilities: no impact <br />- Owner's Equity: decrease<br /><br />Transaction Selling Common Stock for Cash <br />- Assets: increase <br />- Liabilities: no impact <br />- Owner's Equity: increase<br /> <br />OWE VENDOR FOR PURCHASE OF ASSET <br />- Assets: increase <br />- Liabilities: increase <br />- Owner's Equity: no impact <br /><br />PAID OWNER FOR DIVIDEND <br />- Assets: decrease <br />- Liabilities:no impact <br />- Owner's Equity: decrease <br /><br />Paid vendor <br />- Assets: decrease <br />- Liabilities: decrease <br />- Owner's Equity: no impact.

Explain

<p> This problem relates to the most fundamental structure of balance accountability within organizations: assets = liabilities + owner's equity. Each given activity in an organization results in changes in these components, demonstrating the concept of the "double-entry" accounting system.<br /><br />Transaction A: "Paid cash for expenses". Leaving cash implicates less assets and paying overprices refers a decline in equity.<br />In the second case of selling common stock for cash, it generates an influx of assets (cash) and increases owner's equity (common stock).<br />The third situation "Owe to the vendor for the purchase of asset" results in gain for assets and liabilities alike, the asset you purchased and the due amount you owe to the vendor.<br />"Worth paying owners for dividends" outcomes in subtractive owner's equity (dividends paid are drawn from owner's equity) and reduce in assets because cash or other assets are used to reimburse the dividends.<br />Lastly, "Paid the vendor for amount previously owed" decrements both liability and asset figures. You decrease the liability by paying off the debt to the vendor, and the asset drops due to expenditure of cash on vendors.</p>
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