Question

2. The following transactions were completed by the company. Provide the impact of each
transaction on individual items of the accounting equation.
a. The company completed consulting work for a client and immediately collected $7,200 cash.
b. The company completed commission work for a client and sent a bill for $5,700 to be received
within 30 days.
c. The company paid an assistant $2,250 cash as wages for the period.
d. The company collected $2,850 cash as partial payment for the amount owed by the client in
transaction b.
e. The company paid $1.040 cash for this period's cleaning services.

Answer 1

The transactions of a corporation described here will affect the components of the accounting equation. The accounting equation informs us about assets, liabilities, and capital.

Because every transaction has two effects in an accounting equation, it serves as the foundation of the double entry system. The assets equal the obligations(Liabilities) plus the owner's equity.

$Liabilities + Owner's Equity = Assets$

a. The company completed consulting work for a client and immediately collected $7,200 cash earned.

$Assets = Liabilities + Owner's Equity$

$7,200 = 0 + 7,200$

The cash and capital balances are both growing by $7,200.

b. The company completed commission work for a client and sent a bill for $5,700 to be received within 30 days.

$Assets = Liabilities + Owner's Equity$

$5,700 = 0 + 5,700$

Bills receivable are an asset, and capital is growing as well.

c. The company paid an assistant $2,250 cash as wages for the period.

$Assets = Liabilities + Owner's Equity$

$(2,250) = 0 + (2,250)$

Payment leads in a decrease in both cash and equity.

d. The company collected $2,850 cash as partial payment for the amount owed by the client in

transaction b.

$Assets = Liabilities + Owner's Equity$

$2,850 = 0 + 2,850$

Cash collection raises both the cash and the owner's equity.

e. The company paid $1.040 cash for this period's cleaning services.

$Assets = Liabilities + Owner's Equity$

$(1,040) = 0 + (1,040)$

Payment leads in a decrease in both cash and equity.

Hence, Accounting equations depict the company's completed transactions.

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