Question

The following transactions were completed by the company.

Answer 1

Answer:

The impact of each transaction on individual items of the accounting equation:

A. The company completed consulting work for a client and immediately collected $6,200 cash earned.

Assets (Cash + $6,200) = Liabilities + Equity (Retained Earnings + $6,200)

B. The company completed commission work for a client and sent a bill for $4,700 to be received within 30 days.

Assets (Accounts Receivable + $4,700) = Liabilities + Equity (Retained Earnings + $4,700)

C. The company paid an assistant $1,750 cash as wages for the period.

Assets (Cash -$1,750) = Liabilities + Equity (Retained Earnings -$1,750)

D. The company collected $2,350 cash as a partial payment for the amount owed by the client in transaction b.

Assets (Cash +$2,350 and Accounts Receivable -$2,350) = Liabilities + Equity

E. The company paid $840 cash for this period's cleaning services.

Assets (Cash -$840) = Liabilities + Equity (Retained Earnings -$840)

Explanation:

The accounting equation is that assets are always equal to liabilities and equity before and after every business transaction.  It is an important principle of accounting and the fulcrum of the double-entry system of accounting.  It establishes the two sides to every transaction.  It can be used to show the impact of daily business transactions on the assets, liabilities, and stockholders' equity.