Chapter 2, Problem 1CPA

To determine

Accounting Transaction:  An economic event, which causes impact (increases or decreases the value of the assets, liabilities or stockholder’s equity) in the accounting equation, is referred to as accounting transaction.

Accrual basis accounting: According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

To analyze: The correct effect of the given transaction.