Answer:
Analyze each transaction and indicate the amount of increases and decreases in the accounting equation.
Assets = Liabilities + Stockholder's equity
Explanation:
(a) Provide services to customers on account for $50,000.
Account receivable=equity ( net income (revenue)
50000=50000
(b) Receive cash of $42,000 from customers in (a) above.
Cash=-(account receivable)
(c) Purchase bike equipment by signing a note with the bank for $35,000.
equipment=account payable
(d) Pay utilities of $5,000 for the current month.
-cash=-equity ( expenses)
The accounting effects to take place for the transactions will be, A-Ac Receivables increase; B-Cash Increase; C-Bills Payable Increase; D-Cash decrease.
Whenever an accounting transaction takes place, an effect takes place in the assets, liabilities or equities of a firm by either increase or decrease in the respective balances.
In the above example, Badger Biking Company provided services of $50,000. This will increase the amount of account receivables of the firm. Receiving Cash of $42,000 for the same will increase the cash balance. Both these transactions will have an effect on the asset balances.
When bike equipment is purchased on credit banknote for $35,000 it will lead to an increase in the Bills payable of the liabilities of the firm. Payment of utilities will have an effect on decrease in cash balances of the firm.
Hence, the accounting effects for transactions in the books of Badger Biking Company for the month of June are as aforementioned.
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