Answer :
Sure! Let's go through each transaction step-by-step and see how it affects the accounting equation, which is [tex]\( \text{Assets} = \text{Liabilities} + \text{Owner's Equity} \)[/tex].
1. Justin Cole started the business with a cash investment of [tex]$60,000.
- Cash increases by $[/tex]60,000.
- This is an increase in Owner's Equity, specifically Justin Cole's Capital.
[tex]\[
\text{Assets (Cash): } + 60,000 \quad \text{Owner's Equity (Capital): } + 60,000
\][/tex]
2. Purchased equipment for [tex]$22,000 on credit.
- Equipment increases by $[/tex]22,000.
- Accounts Payable (Liabilities) increases by [tex]$22,000.
\[
\text{Assets (Equipment): } + 22,000 \quad \text{Liabilities (Accounts Payable): } + 22,000
\]
3. Performed services for $[/tex]3,100 in cash.
- Cash increases by [tex]$3,100.
- Revenue increases by $[/tex]3,100, which also increases Owner's Equity.
[tex]\[
\text{Assets (Cash): } + 3,100 \quad \text{Owner's Equity (Revenue): } + 3,100
\][/tex]
4. Purchased additional equipment for [tex]$4,600 in cash.
- Equipment increases by $[/tex]4,600.
- Cash decreases by [tex]$4,600.
\[
\text{Assets (Equipment): } + 4,600 \quad \text{Assets (Cash): } - 4,600
\]
5. Performed services for $[/tex]5,050 on credit.
- Accounts Receivable increases by [tex]$5,050.
- Revenue increases by $[/tex]5,050, which also increases Owner's Equity.
[tex]\[
\text{Assets (Accounts Receivable): } + 5,050 \quad \text{Owner's Equity (Revenue): } + 5,050
\][/tex]
6. Paid salaries of [tex]$4,450 to employees.
- Cash decreases by $[/tex]4,450.
- Expenses increase by [tex]$4,450, which decreases Owner's Equity.
\[
\text{Assets (Cash): } - 4,450 \quad \text{Owner's Equity (Expenses): } - 4,450
\]
7. Received $[/tex]3,200 cash from charge account customers.
- Cash increases by [tex]$3,200.
- Accounts Receivable decreases by $[/tex]3,200.
[tex]\[
\text{Assets (Cash): } + 3,200 \quad \text{Assets (Accounts Receivable): } - 3,200
\][/tex]
8. Paid [tex]$13,000 to a creditor on account.
- Cash decreases by $[/tex]13,000.
- Accounts Payable decreases by [tex]$13,000.
\[
\text{Assets (Cash): } - 13,000 \quad \text{Liabilities (Accounts Payable): } - 13,000
\]
Final Balances:
- Cash: $[/tex]44,250
- Accounts Receivable: [tex]$1,850
- Equipment: $[/tex]26,600
- Accounts Payable: [tex]$9,000
- Justin Cole, Capital: $[/tex]60,000
- Revenue: [tex]$8,150
- Expenses: $[/tex]4,450
Calculated Totals:
- Total Assets: [tex]\( 44,250 + 1,850 + 26,600 = 72,700 \)[/tex]
- Total Liabilities: [tex]\( 9,000 \)[/tex]
- Total Owner's Equity: [tex]\( 60,000 (Capital) + 8,150 (Revenue) - 4,450 (Expenses) = 63,700 \)[/tex]
Using the accounting equation [tex]\(\text{Assets} = \text{Liabilities} + \text{Owner's Equity}\)[/tex], we can confirm:
[tex]\[
72,700 = 9,000 + 63,700
\][/tex]
Everything balances correctly!
1. Justin Cole started the business with a cash investment of [tex]$60,000.
- Cash increases by $[/tex]60,000.
- This is an increase in Owner's Equity, specifically Justin Cole's Capital.
[tex]\[
\text{Assets (Cash): } + 60,000 \quad \text{Owner's Equity (Capital): } + 60,000
\][/tex]
2. Purchased equipment for [tex]$22,000 on credit.
- Equipment increases by $[/tex]22,000.
- Accounts Payable (Liabilities) increases by [tex]$22,000.
\[
\text{Assets (Equipment): } + 22,000 \quad \text{Liabilities (Accounts Payable): } + 22,000
\]
3. Performed services for $[/tex]3,100 in cash.
- Cash increases by [tex]$3,100.
- Revenue increases by $[/tex]3,100, which also increases Owner's Equity.
[tex]\[
\text{Assets (Cash): } + 3,100 \quad \text{Owner's Equity (Revenue): } + 3,100
\][/tex]
4. Purchased additional equipment for [tex]$4,600 in cash.
- Equipment increases by $[/tex]4,600.
- Cash decreases by [tex]$4,600.
\[
\text{Assets (Equipment): } + 4,600 \quad \text{Assets (Cash): } - 4,600
\]
5. Performed services for $[/tex]5,050 on credit.
- Accounts Receivable increases by [tex]$5,050.
- Revenue increases by $[/tex]5,050, which also increases Owner's Equity.
[tex]\[
\text{Assets (Accounts Receivable): } + 5,050 \quad \text{Owner's Equity (Revenue): } + 5,050
\][/tex]
6. Paid salaries of [tex]$4,450 to employees.
- Cash decreases by $[/tex]4,450.
- Expenses increase by [tex]$4,450, which decreases Owner's Equity.
\[
\text{Assets (Cash): } - 4,450 \quad \text{Owner's Equity (Expenses): } - 4,450
\]
7. Received $[/tex]3,200 cash from charge account customers.
- Cash increases by [tex]$3,200.
- Accounts Receivable decreases by $[/tex]3,200.
[tex]\[
\text{Assets (Cash): } + 3,200 \quad \text{Assets (Accounts Receivable): } - 3,200
\][/tex]
8. Paid [tex]$13,000 to a creditor on account.
- Cash decreases by $[/tex]13,000.
- Accounts Payable decreases by [tex]$13,000.
\[
\text{Assets (Cash): } - 13,000 \quad \text{Liabilities (Accounts Payable): } - 13,000
\]
Final Balances:
- Cash: $[/tex]44,250
- Accounts Receivable: [tex]$1,850
- Equipment: $[/tex]26,600
- Accounts Payable: [tex]$9,000
- Justin Cole, Capital: $[/tex]60,000
- Revenue: [tex]$8,150
- Expenses: $[/tex]4,450
Calculated Totals:
- Total Assets: [tex]\( 44,250 + 1,850 + 26,600 = 72,700 \)[/tex]
- Total Liabilities: [tex]\( 9,000 \)[/tex]
- Total Owner's Equity: [tex]\( 60,000 (Capital) + 8,150 (Revenue) - 4,450 (Expenses) = 63,700 \)[/tex]
Using the accounting equation [tex]\(\text{Assets} = \text{Liabilities} + \text{Owner's Equity}\)[/tex], we can confirm:
[tex]\[
72,700 = 9,000 + 63,700
\][/tex]
Everything balances correctly!
