Answer:
We can first assess the effects of each of the transactions on the balance cheat.
the a) transaction will reduce cash by $500, and reduce creditors by the same amount.
the b) transaction will increase cash by $300, and reduce debtors by the same amount.
the c) transaction will reduce cash by $1,000, and reduce the Loan from L. Stennett by the same amount.
Now we can list this effects.
Cash is reduced by $500 + $1,500 and increased by $300. The total net effect on cash is then a $1,200 decrease ($1,500 decrease + $300 increase).
All the other accounts have only one reduction, so we simply substract that figure from the balance sheet on the picture to obtain our new figures.
Now we can write the new balance sheet
Balance Sheet as at 10 April 2007
Assets
Buildings $6,000
Motor Vehicle $4,000
Stock of Goods $2,000
Debtors $2,500 (-$300)
Cash at bank $2,000 (-$1,200)
Total Assets $16,500
Liabilities
Loan L. Stennet $1,000 (-$1,000)
Creditors $1,100 (-$500)
Total Liabilities $2,100
Capital $14,400
By the accounting equation, Capital + Liabilities = Assets, we see that it holds true: $14,400 + $2,100 = $16,500, so are figures are right.
