1. Give 2 examples of the following elements. Describe what sort of activity wil

Question

1. Give 2 examples of the following elements. Describe what sort of activity will cause thouse items to increase and decrease:

Assets:                                                              Liability:

Example 1:                                                      Example 1:

Cause of increases:                                     Cause of increases:

Causes of decreases:                                 Causes of decreases:

Example 2:                                                      Example 2:

Cause of increases:                                     Cause of increases:

Causes of decreases:                                 Causes of decreases:

Explanation / Answer

1. Equipment purchased on account

Asset increases as equipment is purchased

liability increases as it is purchased on credit and to be paid in future

Journal

Equipment Dr

Accounts payable Cr.

2. Paid cash for equipment purchased

Asset decreases as cash is paid

Liability Decreases as the liability created earlier has been paid off

Journal entry

Accounts payable Dr

Cash cr.

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