Explanation Accounting equation : Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below: Assets = Liabilities + Stockholders' Equity Following are the effects on accounting equation of the adjusting entries : a. Supplies are an asset. There is a decrease in the asset. Hence, the asset will be decreased by $750 [ (Beginning supplies)$850 − ( Ending supplies)$100 ] . Supplies are an asset. Hence, there is no effect on liability account. Supplies expenses are an expense account which is a component of stockholders’ equity . There is an increase in the expense account which decreases the stockholders’ equity. Hence, the stockholders’ equity will be decreased by $750. b. Salaries and wages payable is a liability. Hence, there is no effect on the asset account. Salaries and wages payable is a liability. There is an increase in the liability. Hence, liability account will be increased by $3,700. Salaries and wages expense is an expense account which is a component of stockholders’ equity. There is an increase in the expense account which decreases the stockholders’ equity. Hence, the stockholders’ equitywill be increased by $3,700. c. Unearned revenue is a liability. Hence, there is no effect on the asset account. Unearned revenue is a liability. There is a decrease in the liability. Hence, unearned revenue will be decreased by $2,200 ( $ 6 , 600 × 2 6 = $ 2 , 200 )

Loose-leaf for Fundamentals of Financial Accounting with Connect

5th Edition

ISBN: 9781259619007

Author: Fred Phillips Associate Professor

Publisher: McGraw-Hill Education

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Chapter 4, Problem 4.9E

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Loose-leaf for Fundamentals of Financial Accounting with Connect

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