PB5. LO 3.4Indicate what impact (+ for increase; – for decrease) the following transactions would have on the accounting equation, Assets = Liabilities + Equity. TransactionImpact 1Impact 2Paid balance due for accounts payable Charged clients for legal services provided Purchased supplies on account Collected legal service fees from clients for current month Issued stock in exchange for a note receivable

Answered: PB5. LO 3.4Indicate what impact (+…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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PB5.

LO 3.4Indicate what impact (+ for increase; – for decrease) the following transactions would have on the accounting equation, Assets = Liabilities + Equity.

Transaction	Impact 1	Impact 2
Paid balance due for accounts payable
Charged clients for legal services provided
Purchased supplies on account
Collected legal service fees from clients for current month
Issued stock in exchange for a note receivable

Expert Solution

Step 1

Accounting Equation:

The entire assets of an organization are equal to the sum of its liabilities and shareholders' equity, as per the accounting equation. The basic idea of the double entry system of accounting is that there should be a relationship between the assets, liabilities, and stockholder’s equity of the organization.

Accounting Equation:

Assets = Liabilities + Owner’s Equity

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