U1 AOS2: KK3 - Two-fold Effect of Transactions on the Accounting Equation

Question 1

The accounting equation is:

Answer 1

Assets = Liabilities + Owners Equity

Question 2

The purchase of a vehicle for $20,000 cash (not inc GST) would have what impact on the accounting equation?

Answer 2

Assets: decrease bank by $22,000
Increase vehicle by $20,000

Liabilities:
Decrease GST Payable by $2,000

Owners Equity:
No effect

Question 3

The payment of $500 towards a loan would have what impact on the accounting equation?

Answer 3

Assets: decrease bank by $500

Liabilities:
Decrease loan by $500

Owners Equity:
No effect

Question 4

A capital contribution of $100,000 would have what impact on the accounting equation?

Answer 4

Assets: Increase bank by $100,000

Liabilities:
No effect

Owners Equity:
Increase capital by $100,000