Paid electricity consumed during the period how does it affect accounting equation
Answers
Explanation:
Accounting Equation for a Sole Proprietorship: Transactions 7–8
Sole Proprietorship Transaction #7.
On December 7, 2018 ASC uses a temporary help service for 6 hours at a cost of $20 per hour. ASC will pay the invoice when it is due in 10 days. The effect on its accounting equation is:
14x-simple-table-16
ASC's liabilities increase by $120 and the expense causes owner's equity to decrease by $120.
The liability will be recorded in Accounts Payable and the expense will be reported in Temp Service Expense. The journal entry for recording the use of the temp service is:
14X-journal-07
The effect of the first seven transactions on the accounting equation can be viewed here:
14x-simple-table-17
The totals show us that the company has assets of $17,200 and the sources are the creditors with $7,120 and the owner of the company with $10,080. The accounting equation totals also tell us that the company has assets of $17,200 with the creditors having a claim of $7,120. This means that the owner's residual claim is $10,080.