Ask Me Help Desk

Ask Me Help Desk (https://www.askmehelpdesk.com/forum.php)
-   Accounting (https://www.askmehelpdesk.com/forumdisplay.php?f=19)
-   -   Assets, Liabilities and equity (https://www.askmehelpdesk.com/showthread.php?t=21413)

  • Feb 22, 2006, 02:16 PM
    mfram
    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.
  • Feb 22, 2006, 04:33 PM
    CaptainForest
    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.
  • Feb 22, 2006, 04:36 PM
    CaptainForest
    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

  • May 21, 2012, 05:49 PM
    amercado54
    If liabilities =35,000 and net assets = 50,000, what does assets equal?
  • May 21, 2012, 06:15 PM
    paraclete
    Quote:

    Originally Posted by mfram View Post

    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

  • All times are GMT -7. The time now is 09:26 AM.