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5 August, 05:00

Grandmark printing pays $2,000 rent to the landlord of the building where its facilities are located. how does this transaction affect the accounting equation for grandmark

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  1. 5 August, 05:13
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    Note: Assets = Liabilities + Owner's Equity

    This transaction is considered as an expense for the part of Grandmark. To be specific, the $2,000 paid as rent to the landlord of the building is classified as rent expense. The payment of $2,000 will reduce Grandmark's assets because the cash will be deducted for this payment. On the other side of the equation, the Owner's Equity will also be deducted because expenses will reduce the equity of the company. In this way, the accounting equation is still balanced ($2,000 reduction to the assets and $2,000 deduction to the owner's equity). In every financial transactions, the accounting equation should always be balanced.
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