mfram Posts: 1, Reputation: 1 New Member #1 Feb 22, 2006, 02:16 PM
Assets, Liabilities and equity
I need to know if this is correct, if its not an explanation would be great :) I'm not an accounting student, just taking it for GE and I'm just confused..

Indicate where each tansaction causes an increase (+), decrease (-) or no change (NC) in assets, liabilities and equity

(type of transaction - asset/liability/equity)
Purchase supplies on credit - NC/+/-
Paid for previously purchases supplies - -/NC/-
Paid for employees weekly salary - -/NC/-
Paid out owner's draw - -/NC/-
Purchases a truck with cash - -/NC/-
Received a telephone bill to bepaid next month - no idea

One more...
At the beginning on the year, Gilbert Co's assets were \$180,000 and its equity was \$100,000. During the year assets increased by 60,000 and liabilities increased by 10,000. What was the equity at the end of the year?

I thought Assets=Liabilities + Owners Equity but it doesn't seem right when I do it. Are Assets always perfectly equal to L and OE?

180000=80000+100000
+60000=+10000
240,000=90,000+150,000

making OE at the end of the year \$150,000? It just seems like its too much.
 CaptainForest Posts: 3,645, Reputation: 393 Ultra Member #2 Feb 22, 2006, 04:33 PM
Indicate where each tansaction causes an increase (+), decrease (-) or no change (NC) in assets, liabilities and equity

(type of transaction - asset/liability/equity)
Purchase supplies on credit - NC/+/-

NO.
Journal Entry is
Debit Supplies (ASSET goes up)
Credit Accounts Payable (Liability goes up)

So, Assets go up, and so do liabilities, no change to equity

A/L/OE
+/+/NC

Paid for previously purchases supplies - -/NC/-

NO.
Journal Entry is
Debit Accounts Payable (Liability goes down)
Credit Cash (ASSET goes down)

A/L/OE
-/-/NC

Paid for employees weekly salary - -/NC/-

Correct

Paid out owner's draw - -/NC/-

Correct

Purchases a truck with cash - -/NC/-

NO.
Journal Entry is
Debit Truck (Assets goes up)
Credit Cash (ASSET goes down)

They cancel each other out.

A/L/OE
NC/NC/NC

Received a telephone bill to bepaid next month - no idea

Journal Entry is
Debit Telephone Expense (equity goes down)
Credit Accounts Payable (Liability goes up)

A/L/OE
NC/+/-

Remember: Assets = Liabilities + OE

So if Assets go up, then either Liabilities and/or OE must go up to match it.
If Liabilities go up, assets must go up OR OE must do down to cancel it out.
 CaptainForest Posts: 3,645, Reputation: 393 Ultra Member #3 Feb 22, 2006, 04:36 PM
One more...
At the beginning on the year, Gilbert Co's assets were \$180,000 and its equity was \$100,000. During the year assets increased by 60,000 and liabilities increased by 10,000. What was the equity at the end of the year?

I thought Assets=Liabilities + Owners Equity but it doesn't seem right when I do it. Are Assets always perfectly equal to L and OE?

180000=80000+100000
+60000=+10000
240,000=90,000+150,000

making OE at the end of the year \$150,000? It just seems like its too much.

It might seem like to much, but in the context of this question, you are correct. Owner's Equity is \$150,000 in this case.

You can think about it logically.

If I increase my total Assets by \$60,000 but I only increase my total debt (liabilities) by \$10,000 then that means I made a \$50,000 increase in my total equity.

So old equity was \$100,000 + \$50,000 that I made this year so my new equity is \$150,000

 amercado54 Posts: 1, Reputation: 1 New Member #4 May 21, 2012, 05:49 PM
If liabilities =35,000 and net assets = 50,000, what does assets equal?
 paraclete Posts: 2,706, Reputation: 173 Ultra Member #5 May 21, 2012, 06:15 PM
Originally Posted by mfram

Indicate where each tansaction causes an increase (+), decrease (-) or no change (NC) in assets, liabilities and equity

(type of transaction - asset/liability/equity)
Purchase supplies on credit - NC/+/- ok
Paid for previously purchases supplies - -/NC/- depending on the bank account balance reduces an asset, reduces a liability has no effect on equity
Paid for employees weekly salary - -/NC/- ok
Paid out owner's draw - -/NC/- ok
Purchases a truck with cash - -/NC/- NC/-/-
Received a telephone bill to bepaid next month - NC/+/-

.
I have made comments above obviously you have to decide the status of the bank account whether it is an asset or a liability

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