Kennel earns service revenue by caring for the pets of customers. Tiny Town Kennel is organized as a sole proprietorship and owned by Earle Martin. During the past month, Tiny Town Kennel has the following transactions:

a) Received $520 cash for service revenue earned.
b) Paid $325 cash for salaries expense.
c) Martin contributed $1,000 to the business in exchange for capital.
d) Earned $640 for service revenue, but the customer has not paid Tiny Town Kennel yet.
e) Received utility bill of $85, which will be paid next month.
f) Martin withdrew $100 cash.

Indicate the effects of the business transactions on the accounting equation for Tiny Town Kennel.

Transaction (a) is answered as a guide. a. Increase asset (Cash): Increase equiy (Service Revenue)

Question

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eugeniawatanabe eugeniawatanabe · Answer 1 · 2019-09-16T17:03:05+02:00

Answer:

a) Increase asset (Cash): Increase equity (Service Revenue) - GUIDE

b) Decrease equity (Salaries): Decrease asset (Cash)

c) Increase asset (Cash): Increase equity (Capital)

d) Increase asset (Receivable Accounts): Increase equity (Service Revenue)

e) Decrease equity (Utility): Increased liabilities (Others payable accounts)

f) Decrease equity (Capital): Decrease assets (Cash)

Explanation:

Accounting Equation Formula :

Assets = Liabilities + Equity

According to the formula transactions must be recorded as follows:

DEBIT: Asset increases, Liabilities decreases, and Equity decrease.

CREDIT: Asset decreases, Liabilities increases, and Equity increase.