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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## This note was uploaded on 11/14/2011 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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Some transactions affect only one side of the accounting equation

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