Some transactions affect only one side of the accounting equation

Some transactions affect only one side of the accounting equation

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Some transactions affect only one side of the accounting equation, but the double-entry  bookkeeping system nevertheless ensures that the accounting equation remains in balance. For  example, if the company pays $30,000 on August 3 to purchase equipment, the cash account's  decrease is recorded with a $30,000 credit and the equipment account's increase is recorded with a  $30,000 debit. These two asset-account entries offset each other, so the accounting equation  remains in balance. Since the cash balance was $50,000 before this transaction occurred, the  company has $20,000 in cash after the equipment purchase. A compound entry  is necessary when a single transaction affects three or more accounts. Suppose  the company's owner purchases a used delivery truck for $20,000 on August 6 by making a $2,000 
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Unformatted text preview: cash down payment and obtaining a three-year note payable for the remaining $18,000. This transaction is recorded by debiting (increasing) the vehicles account for $20,000, crediting (increasing) the notes payable account for $18,000, and crediting (decreasing) the cash account for $2,000. The debits and credits total $20,000, and the accounting equation remains in balance because the $18,000 net increase in assets is matched by an $18,000 increase in liabilities. After these three transactions, the company has $68,000 in assets (cash $18,000; equipment $30,000; vehicles $20,000) and $68,000 in liabilities (notes payable)....
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Some transactions affect only one side of the accounting equation

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