Most transactions take place between two independent entities. How you record a particular transaction depends on whose perspective you take.
Required:
For each of the following transactions, explain how it would affect the basic accounting equation of each entity.
a. Loan from a bank: from the borrower’s and the bank’s perspectives
b. Cash sales from the provision of services: from the seller’s and the customer’s perspectives
c. Investment made by Company A in shares of Company B, with the shares being obtained directly from
Company B: from Company A’s and Company B’s perspectives
d. Investment made by Company A in shares of Company B, with the shares being purchased through the Toronto Stock Exchange; that is, the shares had previously been issued by Company B and now trade in the stock market: from Company A’s and Company B’s perspectives
e. Purchase of inventory on account: from the buyer’s and the seller’s perspectives