Accounting Equation Analysis and Effects

The provided assignment involves analyzing 10 accounting transactions and their effects on the accounting equation. The transactions include cash payments to staff, debt repayment, and customer payment. Each transaction is explained in detail, highlighting changes in assets, liabilities, and stockholder equity. This document serves as a resource for students studying accounting, providing a clear understanding of how different financial events impact a company's balance sheet.

Student name: Naseer Almoqbali
Module Name: Principles of Accounting
Module Code: BAAC1102

Question 01:
Business firm and its 10 transaction’s Analysis:
We are discussing the printing service firm, ‘Printerpedia,' as an example. We'll examine and report each
of company's transactions, as well as explain how they affect the financial statements.
Issues $20,000 worth of common stock for cash on February 3, 2020.
1. Orders $3,500 in equipment on account on February 5, 2020, with payment due within the month.
2. Collects $4,000 in cash in advance from a client on February 9, 2020 for services not yet
delivered.
3. Pays $5,500 in services to a person who requests to be paid for the services on February 10,
2020.
4. Pays a $300 electric bill in cash on February 12, 2020.
5. Dividends of $100 were issued to stockholders on February 14, 2020.
6. On February 17, 2020, a client pays $2,800 in cash for services delivered.
7. Paying in full, in cash, for the equipment acquisition on February 5, 2020 on February 18, 2020.
8. Charged $3,600 in cash to staff on February 20, 2020 as a compensation expense.
9. Obtained full cash payment from the buyer on the January 10 contract on February 23, 2020.
10. 10. Pays $1,200 in services to a client who requests to be paid for the services on February 27,
2020.
Transaction 01:
Issues $20,000 in common stock for cash on February 3, 2020.
Analysis:
Printerpedia has earned capital, and the stockholders have invested in the company, so there is a
transaction that needs to be registered.

Printerpedia now has a larger bank account. Cash is a commodity that is growing in value. On the debit
line, money grows.
Stockholders buy common stock as the company issues stock, resulting in a higher common stock number
than before issuance. The common stock account is growing, which has an effect on equity. When we
look at the extended accounting equation, we can see that the credit side of the equation shows that
Common Stock is increasing.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
+$2000 = +$ + $20000
+$2000 = +$ + $20000
Transaction 02:
Purchases equipment on account for $3,500 on February 5, 2020, with payment due within the month.
Analysis:
• In this situation, machinery is a commodity that is growing in value. Since Printerpedia now has more
facilities than before, it has increased. In the debit hand, assets rise, so the Equipment statement will
display a $3,500 debit.
 • The corporation did not immediately pay for the supplies. Lynn demanded that a bill be
forwarded to her for payment at a later date. Printerpedia now has a debt because it owes the
retailer money for the supplies. This responsibility is reported in Accounts Payable. As the
corporation now owes money to the retailer, this debt is growing. Therefore the account liability
increases on the side of credit; And accounts Payable will increase on the credit side as amount of
$3,500.
Effect on Accounting Equation:

Assets = Liabilities + Stockholder Equity
+$3500 = +$3500 + $0
+$3500 = +$3500 + $0
Transaction 03:
Accepts $4,000 cash in advance from a client for services not yet delivered on February 9, 2020.
Analysis:
• Cash was issued, resulting in an increase in the Cash account. On the debit hand, cash is a commodity
that rises.
• Since Printerpedia has not yet delivered the facility, the revenue cannot be accepted as received. Once
the client receives the item, the business is liable to them. This debt will be reported in the budget for
Unearned Revenue. This is a new responsibility for the corporation, so this account can grow. Unearned
Revenue would consider the $4,000 on the credit side as liabilities grow.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
+$4000 = +$4000 + $0
+$4000 = +$4000 + $0
Transaction 04:
Pays $5,500 in services to a client who requests to be paid for the services on February 10, 2020.
Analysis:

Since the corporation offered a service to the customer, sales should be recognised as received (revenue
appreciation principle), resulting in a revenue boost. Availability A taxable account that affects equity is
referred to as a sales account. On the credit line, revenue records improve.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
+$5500 = +$0 + $5500
+$5500 = +$0 + $5500
Transaction 05:
Pays a $300 electric bill in cash on February 12, 2020.
Analysis:
The utility bill was paid in cash, indicating the cash is running out.
In the credit line, cash is a commodity that depreciates.
The corporation incurs a charge when it pays an energy bill. Utility Expense rises, and it does so on the
negative side of the ledger.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
-$300 = +$ -$300
+$300 = +$ + $300

Transaction 6:
On February 14, 2020, allocated $100 in cash to stockholders in the form of dividends.
Analysis:
The dividends is paid in cash, implying that cash is diminishing.
In the credit line, cash is a commodity that depreciates.
 Dividends were distributed, resulting in an improvement in the Dividends portfolio. Dividends
are recorded on the debit side and are part of stockholders' equity. This will reduce the
stockholder’s equity.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
-$100 = +$ -$100
+$100 = +$ + $100
Transaction 7:
Accepts $2,800 in cash from a client for services provided on February 17, 2020.
Analysis:
The buyer made a cash deposit, which increased the balance in the Cash account. Cash is a growing
currency, and it's the on the debit side.
Since Printerpedia delivered the services, income should be recorded in the Service Revenue report as
received. Service revenue would be increased here.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
-$2800 = +$ -$2800

+$2800 = +$ + $2800
Transaction 8:
Billed in full, in cash, for the equipment acquisition on February 5, 2020 on February 18, 2020.
Analysis:
• Cash is diminishing as a result of the outstanding debt generated on February 5 being charged. On the
credit hand, cash is a commodity that can decline.
• Accounts Payable acknowledged the company's obligation to reimburse the dealer for the supplies.
Accounts Payable would be lowered because the organization is already paid down its loans. Liabilities
decline on the debit side, resulting in a $3,500 decrease in Accounts Payable on the debit side.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
-$3500 = -$3500 +$0
+$3500 = +$3500 + $0
Transaction 9:
Charged $3,600 in cash to staff as a compensation expense on February 20, 2020.
Analysis:
• Cash was used to pay for pensions, resulting in a reduction in the Cash account. In the credit line, cash is
a commodity that depreciates.
• Salaries are a corporate burden for employee jobs. This will boost the cost of salaries, impacting wealth.
On the debit hand, expenses rise; thus they will increase on other side also.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
-$3600 = 0 - $3600
$3600 = 0 $3600

Transaction 10:
Collected full cash payment from the buyer on the January 10 transaction on February 23, 2020.
Analysis:
• Cash was issued, resulting in an increase in the Cash account. Cash is a commodity, and on the debit
side, investments grow.
• Accounts Receivable are created to monitor potential customer payments; given that the customer has
paid in full, Accounts Receivable can be reduced. Assets will be decreased on the credit side now.
Effect on Accounting Equation:
Assets = Liabilities + Stockholder Equity
+$5500 = 0 $0
-$5500 = 0+ 0
$0 = 0 +
Question 02: Part B
How the study of accounting will help in your personal and professional life?
The study of accounting is very useful in professional as well as personal life. Pursuing the life as an
accountant may be the best way of investing your education in the daily life. According to a survey the
demand of accountant will be increased to 10 % in the coming 5 years. In the professional life we can
raise an understanding of taxation of daily life and other business laws. In the personal life if you belongs
to a good family or a family having its own business then you have a great opportunity to start your new
business with a high performance and lower rate of risk. Most students want to know what professions are

in high demand before deciding on a career choice. If you are one of these students, you should pursue a
career in accounting since capital is the lifeblood of the American economy, and unlike many other
professions, accounting is considered recession-proof. Accounting was classified as one of the best
careers by Forbes magazine in 2013. In addition, as a non-finance professional, the accounting boot camp
includes learning finance. This would benefit not just your professional career, but also your personal life.
The course "Finance for Non-Financial Professionals" discusses how to read schedules, estimates, and
financial statements in practice.
References:
 Thompson, C.A., Beauvais, L.L. and Lyness, K.S., 1999. When work–family benefits are not
enough: The influence of work–family culture on benefit utilization, organizational attachment, and
work–family conflict. Journal of Vocational behavior, 54(3), pp.392-415.
 Phillips, F. and Heiser, L., 2011. A field experiment examining the effects of accounting equation
emphasis and transaction scope on students learning to journalize. Issues in Accounting
Education, 26(4), pp.681-699.
 JUÁREZ, F., 2016. Assets value change in the accounting equation. education, 4(5), p.6.