Transaction 6 - account with the store, a liability account...

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Transaction 6 : On April 5, Mr. Green purchases $50 worth of office supplies, placing the purchase  on his account with the store rather than paying cash. Supplies are a prepaid expense (an asset)  until they are used and thereby become a cost of doing business (an expense). Therefore, an asset  account (supplies) increases and is debited for $50. Since Mr. Green places the purchase on his 
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Unformatted text preview: account with the store, a liability account (accounts payable) increases and is credited for $50. Accounts payable differ from notes payable. Accounts payable are amounts the company owes based on the good credit of the company or the owner, whereas notes payable are amounts the company owes under formal obligations....
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