Accounting Essay

895 WordsFeb 23, 20134 Pages
The Accounting Equation: ASSETS = LIABILITIES + OWNER’S EQUITY In analyzing the effects of business transactions, the accounting equation must always be balanced. The analysis involves the assets, liabilities and owner’s equity in the business. Sample transactions: March 1 May Gomez opened Happy Tour and Travel Service by contributing cash of P50,000. She has three cars worth P1,200,000 but contributed only two cars worth P750,000. ASSETS | LIABILITIES | OWNER'S EQUITY | Cash 50,000 | | Gomez, Capital 800,000 | Cars 750,000 | | | March 3 Gomez borrowed P100,000 cash from PNB for use in her business. ASSETS | LIABILITIES | OWNER'S EQUITY | Cash 100,000 | Loans Payable 100,000 | | March 7 Bought tables and chairs from Blim’s and paid cash, P45,000. ASSETS | LIABILITIES | OWNER'S EQUITY | Cash (45,000) | | | Furnitures & Fixtures 45,000 | | | March 15 Various equipment were purchased on account from National Winners for P55,000. ASSETS | LIABILITIES | OWNER'S EQUITY | Equipment 55,000 | Accounts Payable 55,000 | | March 18 Gomez made cash withdrawal of P5,000 from personal use. ASSETS | LIABILITIES | OWNER'S EQUITY | Cash (5,000) | | Gomez, Drawing (5,000) | March 20 The account due to National Winners was paid in cash. ASSETS | LIABILITIES | OWNER'S EQUITY | Cash (55,000) | Accounts Payable (55,000) | | The summary of the effects of the transactions follows: DATE | ASSETS | LIABILITIES | OWNER'S EQUITY | | Cash | Cars | Equipment | Furniture | Loans Payable | Accounts Payable | Gomez, Capital | Gomez, Drawing | 1-Mar | 50,000 | 750,000 | | | | | 800,000 | | 3-Mar | 100,000 | | | | 100,000 | | | | Balances | 150,000 | 750,000 | | | 100,000 | | 800,000 | | 7-Mar | (45,000) | | | 45,000 | | | | |

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