Part 1: Basic Accounting Equation Effects

Count everything, or almost everything. Just about every event that happens in a business results in changes to the assets, liabilities, or equities. For this reason, it is critical for the accountant to analyze how every business event affects the basic accounting equation, and how every event must be managed. Part 1 of the assessment is a good test of your critical thinking skills as you apply them to the components of the accounting cycle, in particular the basic accounting equation for the balance sheet.

Given below is a list of 15 business transactions. Using Part 1 of the Assessment 1 Template, indicate whether each transaction increased (+), decreased (), or had no effect (NE) on assets, liabilities, and owner's equity.

Purchased supplies on account.

Received cash for providing a service.

Paid expenses in cash.

Received an investment of cash from the owner.

Experienced a cash withdrawal by the owner.

Received cash from a customer who had previously been billed for services provided.

Paid cash to purchase equipment.

Paid employee salaries.

Paid a creditor from whom the business had previously purchased supplies on account.

Sold new shares of stock.

Paid cash for monthly rent on the office space.

Paid cash for monthly utility bills.

Performed services on account.

Made a payment on a loan received from the bank.

Purchased for cash merchandise that will be later resold for profit.