Answer:
Explanation:
As we know that
Accounting equation comprise of
Total assets = Total liabilities + Shareholder equity
So, the description of each transaction is as follows:
a. Cash A/c Dr $40,000
To Common stock $40,000
(Being the invested cash in exchange for common stock is recorded)
Since both the above accounts i.e cash account and the common stock are increased by $40,000
b. Office supplies A/c Dr $3,000
To Cash A/c $2,000
To Accounts Payable A/c $1,000
(Being the office supplies are purchased for cash and on credit basis)
This transaction reduced the cash balance by $2,000 ($40,000 - $38,000) and the total office supplies is purchased for $3,000 out of which $2,000 is paid for cash and remaining $1,000 is on credit basis.
c. Office furniture A/c Dr $8000
To Cash A/c $8000
(Being the office furniture is purchase for cash is recorded)
In this transaction, the cash balance is $30,000 and the cash balance in previous balance is $38,000 so it get reduced by $8,000. Although the office furniture balance is also increased by $8,000
d. Accounts receivables A/c Dr $6,000
To Service revenue A/c $6,000
(Being the service rendered is recorded)
In this transaction, both the above accounts are increased by $6,000 each
e. Cash A/c Dr $1,000
To Service revenue A/c $1,000
(Being the service is provided for cash is recorded)
In this transaction, the cash balance is $31,000 and the cash balance in previous balance is $30,000 so it get increased by $1,000 Although the service revenue balance is also increased by $1,000
