Effects of Transactions on Elements of the Accounting Equation

question 56

Essay

Effects of transactions on elements of the accounting equation. Some of the transactions carried out by Tsang Company during the first month of the company's operations are listed below. You are to determine the dollar effect of each transaction on the total assets, the total liabilities, and the owners' equity of Tsang Company. Use the symbols (+) for increase, (?) (-) for decrease, and (NC) for no change. An answer is provided for the first transaction to serve as an example.
$$\begin{array} { | l | c | c | c | } \hline \text { Transaction } & \begin{array} { c } \text { Total } \\\text { Assets }\end{array} & \begin{array} { c } \text { Total } \\\text { Liabilities }\end{array} & \begin{array} { c } \text { Owners' } \\\text { Equity }\end{array} \\\hline \begin{array} { l } \text { A. Issued capital stock to Don Tsang in } \\\text { exchange for his investment of } \$ 200,000 \text { in } \\\text { the business. }\end{array} & + \$ 200,000 & \mathrm { NC } & + 200,000 \\\hline \begin{array} { l } \text { B. Purchased a computer for the business for } \\\mathbf { \$ 5 , 5 0 0 } \text { cash. }\end{array} & & & \\\hline \text { C. Borrowed } \$ 20,000 \text { from the bank. } & & & \\\hline \begin{array} { l } \text { D. Purchased office furnishings at a total } \\\text { price of } \$ 4,200 , \text { terms } \$ 600 \text { cash and balance } \\\text { payable in two installments. }\end{array} & & & \\\hline \begin{array} { l } \text { E. Paid } \$ 1,800 \text { of the balance due on the } \\\text { office furnishings. }\end{array} & & & \\\hline \begin{array} { l } \text { F. Sold an extra monitor that had cost } \$ 250 \\\text { for } \$ 300 \text { on credit. }\end{array} & & & \\\hline \begin{array} { l } \text { G. Collected } \$ 150 \text { of accounts receivable } \\\text { from purchaser of the monitor. }\end{array} & & & \\\hline \begin{array} { l } \text { H. Bought a small truck to be used in the } \\\text { business for } \$ 29,000 \text {; paid cash in full. }\end{array} & & & \\\hline\end{array}$$

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Definitions:

Administrative Expenses

Overheads or general expenses related to running a business that are not directly linked to the production or sale of goods or services.

Manufacturing Costs

Expenses related to the production of goods, including labor, materials, and overhead.

Differential Cost

The difference in total cost between two alternatives, used in decision-making processes.

Period Cost

Expenses that are not directly tied to the production process and are expensed in the period they are incurred.