The following are three business transactions. For each column, indicate whether the transactions increased, decreased, or had no effect on assets, liabilities, and stockholders’ equity.AssetsLiabilitiesStockholders’ Equity(a)Purchased supplies on account.Select an option Select an option Select an option (b)Received cash for performing a service.Select an option Select an option Select an option (c)Paid expenses in cash.Select an option
Question
The following are three business transactions. For each column, indicate whether the transactions increased, decreased, or had no effect on assets, liabilities, and stockholders’ equity.AssetsLiabilitiesStockholders’ Equity(a)Purchased supplies on account.Select an option Select an option Select an option (b)Received cash for performing a service.Select an option Select an option Select an option (c)Paid expenses in cash.Select an option
Solution
(a) Purchased supplies on account. Assets: Increase (You have more supplies now, which are considered an asset) Liabilities: Increase (You owe money for the supplies, which is a liability) Stockholders’ Equity: No effect (This transaction doesn't directly affect stockholders' equity)
(b) Received cash for performing a service. Assets: Increase (You received cash, which is an asset) Liabilities: No effect (This transaction doesn't directly affect liabilities) Stockholders’ Equity: Increase (Your equity increases because you earned income)
(c) Paid expenses in cash. Assets: Decrease (You paid cash, reducing your assets) Liabilities: No effect (This transaction doesn't directly affect liabilities) Stockholders’ Equity: Decrease (Your equity decreases because you incurred an expense)
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