Question

Brady Company entered into these transactions during May 2022, its first month of operations.

1. Stockholders invested $ 40,000 in the business in exchange for common stock of the company.
2. Purchased computers for office use for $ 30,000 from Ladd on account.
3. Paid $ 4,000 cash for May rent on storage space.
4. Performed computer services worth $ 19,000 on account.
5. Performed computer services for Wharton Construction Company for $ 5,000 cash.
6. Paid Western States Power Co. $ 8,000 cash for energy usage in May.
7. Paid Ladd for the computers purchased in (2).
8. Incurred advertising expense for May of $ 1,300 on account.
9. Received $ 12,000 cash from customers for contracts billed in (4).

Required:
Using the tabular analysis show the effect of each transaction on the accounting equation.

Answer 1

The effect of each transaction on the accounting equation is to be shown in the attachment below.

The following information should be considered:

• In the accounting equation, the total assets should be equivalent to the total liabilities & the shareholder equity.
• It determined the financial position, performance of the company.
• It is known as the presentation of the balance sheet.

In this way, the accounting equation should be prepared.

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