Explain why it is important that this transaction be recorded correctly and what does it affect if the transaction is not recorded or recorded incorrectly. Transaction $6-$Payment of Expenses with Cash

The business pays $$3,200$ in cash expenses: $$2,000$ for office rent and $$1,200$ for employee salaries. The effects on the accounting equation are as follows:

Expenses have the opposite effect of revenues. Expenses shrink the business, as shown by the decreased balances of assets and equity. Each expense is recorded separately. We record the cash payment in a single amount for the sum of the expenses:

$$3,200($$$2,000+$$$1,200)$ Notice that the accounting equation remains in balance

$($$$12,300+$$$3,000+$$$500+$$$20,000$

$=$$$500+$$$30,000+$$$8,500-$$$2,000-$$$1,200).$