Write one suitable business transaction each for the following which satisfies the given criteria: (a) Increase in one asset causes a decrease in another asset. (b) Increase in an... Write one suitable business transaction each for the following which satisfies the given criteria: (a) Increase in one asset causes a decrease in another asset. (b) Increase in an expense causes a decrease in an asset.
Understand the Problem
The question asks for examples of business transactions that follow specific accounting principles. Part (a) requires an example where one asset increases while another decreases. Part (b) asks for a transaction where an expense increases while an asset decreases. These are basic accounting relationships.
Answer
a) Purchasing equipment with cash. b) Paying rent with cash.
a) Purchasing equipment with cash. This increases the equipment asset while decreasing the cash asset. b) Paying rent with cash. This increases the rent expense while decreasing the cash asset.
Answer for screen readers
a) Purchasing equipment with cash. This increases the equipment asset while decreasing the cash asset. b) Paying rent with cash. This increases the rent expense while decreasing the cash asset.
More Information
An asset is something a company owns that has economic value. Common assets include cash, accounts receivable, and equipment. Expenses are costs a company incurs to generate revenue, such as rent, salaries, and utilities.
Tips
Confusing the effect of the transaction on different accounts. Remember the basic accounting equation: Assets = Liabilities + Equity. Every transaction affects at least two accounts to keep the equation in balance.
Sources
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