. State whether the following transaction will affect assets, liabilities or own

Question

. State whether the following transaction will affect assets, liabilities or owner’s equity:

A. Carolyn Wells deposited $120,000 into the business which is called the Carolyn Wells, CPA (sole proprietor structure)

B. The company purchased some office furniture for $2,500-

C. It also purchased a business car for $25,000 by paying $10,000 cash and getting a loan from a local bank for $15,000 for 15 years.

D. Paid office rent of $1000-

E. Prepared a tax-return and billed a client $500 for the services provided. Client will pay in the next 30 days

F. Purchased insurance to protect the business and the business car in the amount of $2400 for 12 months. The company paid it with the company check 502

Explanation / Answer

Journal entry effect on assets, liabilities,
And Owner equity A. Cash
Owner equity cash as an assets increase, owner equity increase B. Office furniture
Cash furniture as assets increase, cash as asset decrease C. Car
Cash
Notes payable car as asset increase, cash as asset decrease
Notes payable as liability increase D. Rent expense
Cash cash as asset decrease, indirect effect on owner equity,
As profit decrease due to expenses E. Account receivable
Service revenue account receivable as asset increase, owner equity also
Increase indirectly as profit increase.
F. Prepaid insurance
Bank
bank as asset decrease , prepaid insurance as asset increase

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