Question

As the manager of a Papa​ Sean's restaurant, you must deal with a variety of business transactions. Give an example of a transaction that has each of the following effects on the accounting​ equation:a. Increase one asset and decrease another asset. b. Decrease an asset and decrease equity. c. Decrease an asset and decrease a liability. d. Increase an asset and increase equity. e. Increase an asset and increase a liability.

Answer 1

Answer:

Papa Sean's Restaurant

Transactions that affect the Accounting Equation:

a. Increase one asset and decrease another asset.

Cash of $40,000 is received from customers on account.

b. Decrease an asset and decrease equity.

A wage expense of $56,000 is paid for the period

c. Decrease an asset and decrease a liability.

Suppliers are paid $67,000 on account.

d. Increase an asset and increase equity.

Customers are billed $90,000 for services rendered in the month.

e. Increase an asset and increase a liability.

The company purchases equipment worth $35,000 on account.

Explanation:

The accounting equation shows that for each financial transaction of a business affects at least two accounts and may involve the two sides of the accounting equation or affect two accounts on one side of the equation.  This implies that the equation is always in balance.  The accounting equation also explains the duality of business transactions.