Question

Matador company purchases $1,300 of equipment from danger mouse inc. For cash the effect on the components of the basic accounting equation of matador company is?

Answer 1

Danger Mouse Inc. sells $1,300 worth of equipment to Matador Company. The effect of cash on the elements of the Matador Company's fundamental accounting equation is that the total assets remain unchanged.

How much are total assets?

• Current assets and non-current assets, often known as fixed assets, are divided up into total assets.
• Short-term assets known as current assets are utilised to cover current liabilities.
• Long-term assets known as fixed assets are employed by businesses to produce revenue and profits.
• This transaction results in a $1,300 drop in the cash balance and a $1,300 rise in fixed assets, leaving the total assets unchanged.
• The entry is as follows:

General Journal     Debit Credit

Equipment              $XX

Cash                                  $XX

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