1)Give an example for each of the following types of transactions: A)Increase in one asset, decrease in another asset. B)Increase in asset, increase in liability C)Increase in asset, increase in owner's capital D)Decrease in asset, decrease in liability E)Decrease in asset, decrease in owner's capital F)Increase in one liability, decrease in another liability G)Increase in liability, decrease in owner's capital H)Decrease in liability, increase in owner's capital.
Answers
B)Increase in asset, increase in liability - purchase goods on credit ie. increase in stock and increase in creditors
C)Increase in asset, increase in owner's capital -issue of shares ie. increase in share capital and increase in cash .
D)Decrease in asset, decrease in liability -Payment to creditors ie, decrease in cash and decrease in creditors
E)Decrease in asset, decrease in owner's capital- drawings (withdrawn by partners ) ie, decrease in capital ad decrease in cash
F)Increase in one liability, decrease in another liability- Bills Payable issued to Creditors.ie., This will reduce one liability (Creditors) on the one hand and increase another liability (Bills Payable) on the other hand.
G)Increase in liability, decrease in owner's capital - Conversion of share capital into debentures.ie, increase in debentures and decrease in share capital .
H)Decrease in liability, increase in owner's capital.-Conversion of debentures into shares.,ie. increase in share capital and decrease in debenture (long term liability )
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Asset and Transactions
A) Increase in one asset and decrease in another asset.
Sales of goods for cash, will result in increase in cash and decrease in goods.
B) Increase in asset and increase in liability.
Buying inventory on credit, it will increase the inventory which is asset, but same time increases the account payable, i.e. liability.
C) Increase in asset, increase in owner's capital.
Capital introduced by owner, as when capital is introduced by the owner than cash will increase as well as capital will also increase.
D) Decrease in asset, decrease in liability.
Material return to supplier on account, as creditors (liability) and goods (assets) decreases.
E) Decrease in asset, decrease in owner's capital.
Drawings by the proprietor Decrease in liability (capital) and decrease in asset (cash).
F) Increase in one liability, decrease in another liability.
Settlement of creditor by issue of bill of exchange decreases a liability (creditor) and increases another liability (bills payable).
G) Increase in liability, decrease in owner's capital.
Outstanding rent, provided-Increase in creditors for outstanding expenses and decrease in capital.
H) Decrease in liability, increase in owner's capital.
Conversion of Partner's loan into capital, will increase owner capital and loan component gets reduced means liability reduces.