Answer:
Both assets and equity are reduced by $18.
Explanation:
The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as
Assets = Liabilities + Equity
While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.
Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.
the acceptance of a a credit card as payment for $450 of services provided for the customer does not affect the accounting equation as it is an increase and a corresponding decrease in assets. However, the charges a 4% fee for handling the transaction which is equivalent to
= 4% * $450
= $18
Is an expense to the company, this reduces the asset. The entries requires for this transaction is
Debit Cash and cash equivalent $432
Debit Credit card charge (p/l) $18
Credit Accounts receivable $450
Hence assets reduces by $18 and equity reduces by $18.
