Complete the columns to show the effects on assets of the following transactions: a) We pay a creditor $80,000 by cheque. b) Bought fixtures $75,000 by paying with cash. c) Bought goods on credit $60,000. d) The proprietor introduces another $1,000 cash into the business.

Complete the columns to show the effects on assets of the following transactions: a) We pay a creditor $80,000 by cheque. b) Bought fixtures $75,000 by paying with cash. c) Bought... Complete the columns to show the effects on assets of the following transactions: a) We pay a creditor $80,000 by cheque. b) Bought fixtures $75,000 by paying with cash. c) Bought goods on credit $60,000. d) The proprietor introduces another $1,000 cash into the business.

Understand the Problem

The question requires the completion of a table that details the effects on assets due to several business transactions. This involves understanding basic accounting principles such as how payments, purchases, and capital introductions affect a company's asset balance.

Answer

A) Decrease. B) No effect. C) Increase. D) Increase.

Here's the effects on assets for each transaction:

A) Paying a creditor $80,000 by cheque: Decrease in assets (cash/bank decreases). B) Buying fixtures for $75,000 cash: No effect on total assets (cash decreases, fixtures increase). C) Buying goods on credit for $60,000: Increase in assets (inventory increases). D) Proprietor introduces $1,000 cash: Increase in assets (cash increases).

More Information

The accounting equation is Assets = Liabilities + Equity. Every transaction affects at least two accounts to keep the equation in balance.

Tips

The most common mistake is only considering one side of the transaction. For example, when buying fixtures for cash, you need to consider the decrease in cash and the increase in fixtures.

Sources

The Basic Accounting Equation | Financial Accounting - courses.lumenlearning.com

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