Accounting – 1.2 The accounting equation | e-Consult
1.2 The accounting equation (1 questions)
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Transaction 1: Purchase of office equipment on credit (£3,000)
Effect on Accounting Equation:
- Assets (Equipment) increase by £3,000.
- Liabilities (Accounts Payable) increase by £3,000.
- Equity remains unchanged.
Equation:** Assets = Liabilities + Equity. The increase in both assets and liabilities maintains the balance.
Transaction 2: Cash received from customer (£2,000)
Effect on Accounting Equation:
- Assets (Cash) increase by £2,000.
- Liabilities remain unchanged.
- Equity increases by £2,000.
Equation:** Assets = Liabilities + Equity. The increase in assets and equity is balanced by no change in liabilities.
Transaction 3: Payment to suppliers (£500)
Effect on Accounting Equation:
- Assets (Cash) decrease by £500.
- Liabilities (Accounts Payable) decrease by £500.
- Equity remains unchanged.
Equation:** Assets = Liabilities + Equity. The decrease in both assets and liabilities maintains the balance.