Question

For each of the following items give an example of a business transaction that has the described effect on the accounting equation:

increase an asset and increase a liability

increase one asset and decrease another asset

decrease an asset and decrease owners equity

decrease an asset and decrease a liability

increase an asset and increase owners equity

Answer 1

increase an asset and increase a liability : Purchased supplies on account. Increases supplies (asset) and increases accounts payable (liability).

increase one asset and decrease another asset: Purchased supplies with cash. Increase supplies (Asset) decrease cash (Asset).

decrease an asset and decrease a liability: Paid for purchases on account with cash. Decrease cash (asset) and decrease accounts payable (liability).


Hope these help

Answer 2

[AI-generated answer — Explain Bot]

To provide examples of business transactions that have the described effects on the accounting equation, it's important to understand the accounting equation itself. The accounting equation is:

Assets = Liabilities + Owners' Equity

1. Increase an asset and increase a liability:
An example transaction that would have this effect is borrowing money from a bank. Let's say a company borrows $10,000 from a bank. This would increase the company's cash (an asset) by $10,000 and also increase their liabilities (the amount owed to the bank) by $10,000.

2. Increase one asset and decrease another asset:
A common example of this type of transaction is when a company purchases inventory for cash. Let's say a company buys inventory worth $5,000, paying cash for it. This transaction would increase their inventory (an asset) by $5,000, but decrease their cash (another asset) by $5,000.

3. Decrease an asset and decrease owner's equity:
An example of this type of transaction is when a company pays its owner a dividend. Let's say a company distributes dividends to its shareholders in the amount of $1,000. This transaction would decrease the company's cash (an asset) by $1,000 and also decrease the owner's equity by $1,000.

4. Decrease an asset and decrease a liability:
A typical example of this transaction would be when a company repays a loan. Suppose a company pays back a loan of $10,000 to a bank. This transaction would decrease their cash (an asset) by $10,000 and also decrease their liabilities (the amount owed to the bank) by $10,000.

5. Increase an asset and increase owner's equity:
A transaction that demonstrates this effect would be when a company receives an investment from its owner in cash. For instance, if an owner injects $20,000 cash into the business, this transaction would increase the company's cash (an asset) by $20,000 and also increase the owner's equity by $20,000.

In general, understanding the accounting equation and its impact on different business transactions can help clarify the effects on the assets, liabilities, and owner's equity as they change.