EX 1-9 Effect of transactions on accounting equation

Describe how the following business transactions affect the three elements of the accounting equation:

a. Invested cash in business.

b. Paid for utilities used in the business.

c. Purchased supplies for cash.

d. Purchased supplies on account.

e. Received cash for services performed.

Answers:

a. Increases assets and increases owner’s equity.

b. Decreases assets and decreases owner’s equity.

c. Increases assets and decreases assets.

d. Increases assets and increases liabilities.

e. Increases assets and increases owner’s equity.