A company invests $100 into an account to earn interest. How would i show this on the balance sheet? (I debited the asset, "Short-term investment", and credited "Owner's Equity") I would like to know, specifically, what account in Owner's Equity am I crediting?

CaptainForest

You should:

Debit Short-term investment 100
Credit Cash 100

From the wording of your problem, it sounds like the company itself is taking $100 of its cash and placing it into an investment.

student007

Thanx. But if in the problem it does not specify whether the company used cash in thei transaction, can you assume so? For example, if a company purchases land for $10,000,000, can i record it as:

Debit equipment
Credit Cash

And stated the assumption that unless otherwise stated, all transactions were assumed to be done with cash.

Is this technically "allowed" in this type of problem?

CaptainForest

You can not do that.

You would have to
Debit LAND
Credit Cash

Debit LAND, not equipment.

But yeah, if it doenst say how you bought it, you should assume it is paid for with cash.

student007

Thanx a lot. If the asset were a building, I'd include in equipment, or should i just have a separate category called "Building"

CaptainForest

A seperate category called building

Usually you have....
- Land
- Building
- Equipment