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01 Activity 1-WPS Office

The document describes 20 business transactions undertaken by a laundry business and their effects on the accounting equation. Key effects include: 1) Investing cash increases assets and owner's equity. Paying expenses decreases assets and increases expenses. 2) Buying equipment increases assets and decreases cash or increases liabilities if purchased on credit. 3) Borrowing money increases assets and liabilities. Paying liabilities decreases assets and liabilities. 4) Generating revenue from services increases revenue. Collecting cash from customers increases assets.

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Daphne Robles
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268 views

01 Activity 1-WPS Office

The document describes 20 business transactions undertaken by a laundry business and their effects on the accounting equation. Key effects include: 1) Investing cash increases assets and owner's equity. Paying expenses decreases assets and increases expenses. 2) Buying equipment increases assets and decreases cash or increases liabilities if purchased on credit. 3) Borrowing money increases assets and liabilities. Paying liabilities decreases assets and liabilities. 4) Generating revenue from services increases revenue. Collecting cash from customers increases assets.

Uploaded by

Daphne Robles
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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01 Activity 1

Analyzing the Effects of a Business Transaction in the Accounting Equation Indicate the
effects of each business transaction in the accounting equation.
Business Transactions:

Example: The owner invested P800,000 to start the laundry business, Mac Wash Shop.

Effect: The asset (Cash) increases P800,000 and owner’s equity (Capital) increases P800,000.

1. Paid P5,000 for business permits and licenses to operate.

Effect: The asset (cash) decreases P5,000 and expense increases P5,000.

2. Paid P60,000 for a one-year rental of the building to house the business.

Effect: The asset (cash) will decrease P60,000 and expense increases (rental expense) of
P60,000

3. Purchased five (5) units of washing machine for P45,000 each paying 50% cash and the
balance on account.

Effect: The assets (equipment) increases P45,000, the assets (cash) decreases P22,500, and
liability increases P22,500

4. Bought various laundry supplies for cash, P15,000.

Effect: The assets (supplies) increases P15,000 and the assets (cash) decreases P15,000

5. Borrowed P495,000 from a bank and issued a note for the principal. The amount received is
net of finance cost.

Effect: The assets (cash) increases P495,000 and the liability increases P495,000.

6. Received cash for laundry services rendered, P1,000.

Effect: The revenue (service income) increases P1,000.

7. Rendered services on account, P2,000.

Effect: The revenue (service income) increases P2,000.

8. Bought additional laundry supplies for cash, P5,000.

Effect: The assets (equipment/supplies) increases P 5,000 and the assets (cash) decreases
P5,000.

9. Paid the balance due in transaction #4.


Effect: The assets (cash) decreases P22,500 and the liability decreases P22,500.

10. The customer paid balance in transaction #8.

Effect: The assets (cash) increases P2,000.

11. Paid salaries of the two (2) helpers, P12,000.

Effect: The expenses (salary enxpense) increases P12,000

12. Rendered laundry services to a customer on account, P1,500.

Effect: The assets (notes receivable) increases P1,500.

13. The owner withdrew cash for the tuition fee of his daughter, P56,000.

Effect: The liability (cash) increases P56,000 and owner's equity (capital) decreases P56,000.

14. Purchased two (2) units of dryer for cash, P40,000 each.

Effect: The assets (equipment/supplies) increases P40,000 and the assets (cash) decreases
P40,000.

15. Bought additional laundry supplies on account, P12,000.

Effect: The assets (supplies) increases P12,000 and the liability increases P12,000.

16. The inventory of laundry supplies showed that P20,000 are not used.

Effect: The assets (supplies) increases P20,000 and the assets (cash) decreases P20,000.

17. Billed a customer for laundry services, P2,500.

Effect: The revenue (service income) increases P2,500

18. The customer in transaction #18 paid the account in full.

Effect: The assets (cash) increases P2,500.

19. Paid the account in transaction #16.

Effect: The assets (cash) decreases P12,000 and the liability decreases P12,000.

20. Paid P5,000 for the monthly maintenance of the laundry equipment.

Effect: The assets (cash) decreases P5,000.

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