Question

Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example.(If an amount reduces the account balance then enter with negative sign preceding the number e.g 15,000 or parentheses e.g. (15,000).
Cash $-133 Net Income $0
(a) Purchased $133 of supplies for cash.
(b) Recorded an adjusting entry to record use of $31 of the above supplies.
(c) Made sales of $1,297, all on account. 1297 1164
(d) Received $865 from customers in payment of their accounts. 865 299
(e) Purchased equipment for cash, $2,528 -2528 -2229
(f) Recorded depreciation of building for period used, -610 2839

Answer 1

Answer:

a.Cash - $133 Net Income $ 0

b.Cash $0  Net Income -$133

c.Cash $0  Net Income  $1,297

d.Cash $865  Net Income $0

e.Cash -$2,528 Net Income $0

f.Cash  $ 0 Net Income - $610

Explanation:

Item b. The Supplies Expenses will be recognized out of supplies account and this will reduce the Net Income

Item c.  Sales made on Account does not Affect cash but increases Net Income.

Item d. Receipts from Customers only affects Cash and no effect on Net Income.

Item e. Purchase of Equipment is a Capital Expenditure that only affects cash.

Item d. The depreciation expenses only affects Net Income.