Accounting equation

Q1. Evaluate each of the following transactions and determine the effect on the accounting
equation. Name each account as in the following example.
a. Sold $900 worth of T-shirts for $2,250 on account.
b. Purchased a six-month insurance policy for $6,000.
c. Paid employees wages of $500.
d. Received $400 cash from a customer who paid off his account receivable.
e. Adjusted the books to record $1,000 of expired insurance.

Example: Sold $15,000 worth of T-shirts on account.

Assets Liabilities Owners’ Equity

EX: Account receivable, EX: Revenue, $15,000

$15,000

a. A/C Rec: 2,250 No Effect Rev: 2,250

Inv: (900) COGS: (900)

b. Pre-Insurance: 6,000 No Effect No Effect

Cash: (6,000)

c. Cash (500) No Effect No Effect

d. Cash (400) No Effect No Effect

A/C Rec: (400)

e. Insurance: (1,000) No Effect Insurance Exp: (1,000)

Q2. Evaluate each of the following transactions and determine the effect on the accounting
equation. Name each account as in the following example.
a. Sold $3,000 worth of T-shirts for cash.
b. Purchased supplies on account for $900.
c. Paid for two months rent in advance, $2,400.
d. Contracted in May to deliver $1,000 worth of T-shirts to be delivered
in June.
e. At the end of the month, recognized one month’s rent expense.

Example: Sold $15,000 worth of T-shirts on account.

Assets Liabilities Owners’ Equity

EX. Account EX: Revenue,

receivable, $15,000 $15,000

a. Inv: (3,000) No Effect COGS: (3,000)

b. No Effect 900 No Effect

c. No Effect 2,400 . No Effect

d. Rec: 1,000 No Effect Rev: 1,000

e. Rent: (1,200) No Effect No Effect