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16 April, 01:20

Bright Eyes Downtown Diner received a bill of $600 from the White Wine Advertising Agency. The owner, A. A. Bondy, is postponing payment of the bill until a later date. The effect of this transaction on the basic accounting equation is

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  1. 16 April, 01:26
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    Asset = Equity + Liability

    No Effect = Reduces + Increased

    $0 = (-$600) + (+$600)

    Explanation:

    Accounting Equation

    Asset = Equity + Liability

    As bill received against the advertisement services received from the White Wine Advertising Agency. This transaction will be recorded as follows

    Dr. Advertisement Expense $600

    Cr. Account Payable $600

    The expense entry will increase the operating expenses of the company and decrease the Net income which ultimately reduce the Equity value.

    On the other hand the credit entry will create an additional liability for the business. This will increase the Liability.
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Home » Business » Bright Eyes Downtown Diner received a bill of $600 from the White Wine Advertising Agency. The owner, A. A. Bondy, is postponing payment of the bill until a later date. The effect of this transaction on the basic accounting equation is
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