Question Completion:
Show the effects of the transactions on the accounting equation.
Answer:
DAFCO
Jan. 1:
Assets (Bank +Sh800,000) = Liabilities + Equity (Common Stock +Sh800,000)
Assets (Bank -Sh200,000 Cash +Sh200,000) = Liabilities + Equity
Jan. 2:
Assets (Bank -Sh70,000 Inventory +Sh70,000) = Liabilities + Equity
Jan 3:
Assets (Furniture +Sh25,000 Cash -Sh25,000) = Liabilities + Equity
Jan. 3:
Assets (Equipment +Sh75,000) = Liabilities (Accounts payable +Sh75,000) + Equity
Jan. 4:
Assets (Cash +Sh100,000) = Liabilities + Equity (Retained Earnings +Sh100,000)
Jan. 5:
Assets (Inventory +Sh200,000 Bank -Sh200,000) = Liabilities + Equity
Jan. 6:
Assets (Motor Van +Sh210,000 Bank -Sh210,000) = Liabilities + Equity
Jan. 10:
Assets (Bank +Sh500,000) = Liabilities (Bank Loan +Sh500,000) + Equity
Jan. 12:
Assets (Accounts Receivable +Sh75,000) = Liabilities + Equity (Retained Earnings +Sh75,000)
Jan. 16:
Assets (Bank +Sh100,000) = Liabilities + Equity (Retained Earnings +Sh100,000)
Jan. 30:
Assets (Cash -Sh10,000) = Liabilities + Equity (Common Stock -Sh10,000)
Explanation:
The accounting equation indicates that Dafco's assets are equal to its liabilities plus equity. This equation is the basis of the double-entry system of accounting. It is always in balance with each transaction whenever the correct postings are made into the correct accounts.
