Question

August 1 M. Harris, the owner, invested $8,000 cash and $34,400 of photography equipment in the company. August 2 The company paid $3,300 cash for an insurance policy covering the next 24 months. August 5 The company purchased supplies for $1,520 cash. August 20 The company received $2,100 cash from taking photos for customers. August 31 The company paid $881 cash for August utilities. Analyze each transaction above by showing its effects on the accounting equation—specifically, identify the accounts and amounts (including + or −) for each transaction. Use the following partial chart of accounts: Cash; Supplies; Prepaid Insurance; Equipment; M. Harris, Capital; Services Revenue; and Utilities Expense.

Answer 1

Answer:

Date : August 1

Assets (Cash $8,000 and Equipment $34,400) = Increase $42,400

Liabilities = No Effect

Equity (Capital $42,400)  = Increase $42,400

Date : August 2

Assets (Cash  and Equipment) = $3,300 decrease -cash and $3,300 increase - equipment

Liabilities = No effect

Equity = No Effect

Date : August 5

Assets (Cash  and Supplies) = $1,520  decrease -cash and $1,520  increase - equipment

Liabilities = No effect

Equity = No Effect

Date : August 20

Assets (Cash ) = Increase $2,100

Liabilities = No Effect

Equity (Services Revenue) =  Increase $2,100

Date : August 31

Assets (Cash = Decrease $881

Liabilities = No Effect

Equity (Utilities Expense) = Decrease $881

Explanation:

The accounting equation is stated as : Assets = Equity + Liabilities

Each and every transaction first identify the Accounts affected, then determine which accounts fall within the Asset, Equity or Liabilities category  and the effect thereof to the category.