
Principles of Financial Accounting (Elon University)
11th Edition
ISBN: 9781308839233
Author: Marshall
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 4.1ME
To determine
Concept Introduction:
Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:
To Indicate:
The effect of transactions on accounting equation
Expert Solution & Answer

Answer to Problem 4.1ME
The effect of transactions on
Transaction / Adjustment | A = | L + | SE | Net Income |
a. | + | + | ||
b. | +/- | |||
c. | +/- | |||
d. | +/- | + | ||
e. | +/- | + | ||
f. | - | - | ||
g. | + | - | ||
h. | - | - |
Explanation of Solution
The effect of transactions on accounting equation is explained as follows:
Transaction / Adjustment | A = | L + | SE | Net Income | |
a. | Issuance of Common stock for Cash shall increase Cash (Assets) and Common Stock (Equity) | + | + | ||
b. | Payment of Advance rent shall increase the Prepaid Rent (Asset) and decrease the Cash (Asset) | +/- | |||
c. | Purchase of equipment for Cash shall Increase Equipment (Assets) and Decrease the Cash (Assets) | +/- | |||
d. | Purchase of inventory for cash and on account shall increase the asset (Inventory), Decrease the cash (Asset) and increase the Accounts Payable (Liability) | +/- | + | ||
e. | Sale of Inventory on profit shall increase Revenue (Net Income), | +/- | + | ||
f. | Payment of Salaries to employees shall Decrease the Net Income and Decrease the Cash (Asset) | - | - | ||
g. | Accrual of wages shall increase the Expense (Reducing net Income) and increase the Wages Payable (Liability) | + | - | ||
h. | Adjusting the Prepaid Rent shall result in decrease in Prepaid Rent (Assets) and Decrease in Net Income (Expense) | - | - |
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Chapter 4 Solutions
Principles of Financial Accounting (Elon University)
Ch. 4 - Prob. 4.1MECh. 4 - Mini-Exercise 4.2 LO 2, 6, 7 Record transactions...Ch. 4 - Prob. 4.3MECh. 4 - Prob. 4.4MECh. 4 - Exercise 4.5 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.6 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.7 LO 6 Write journal entries Write the...Ch. 4 - Exercise 4.8 LQ 6 Write journal entries Write the...Ch. 4 - Exercise 4.9 LO 2, 6, 7 Record transactions and...Ch. 4 - Exercise 4.10 LO 2. 6, 7 Record transactions and...
Ch. 4 - Exercise 4.11 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.12 LO 2, 6, 7 Record transactions and...Ch. 4 - Exercise 4.13 LO 3 Calculate retained earnings On...Ch. 4 - Prob. 4.14ECh. 4 - Exercise 4.15 LO 6 . 7 Notes receivable-interest...Ch. 4 - Exercise 4.16 LO 6, 7 Notes payable-interest...Ch. 4 - Exercise 4.17 LO 6, 7 Effect of adjustments on net...Ch. 4 - Exercise 4.18 LO 6, 7 Effects of adjustments A...Ch. 4 - Exercise 4.19 LO 6 , 7 T-account analysis Answer...Ch. 4 - Exercise 4.20 LO 6, 7 Transaction analysis using...Ch. 4 - Problem 4.21 LO 2, 6, 7 Record transactions and...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Problem 4.24 LO 6. 7 Calculate income from...Ch. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Problem 4.27 LO 6. 7 Analyze several accounts...Ch. 4 - Prob. 4.28PCh. 4 - Case 4.29LO 6, 7Capstone analytical review of...Ch. 4 - Prob. 4.30C
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