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Chapter 1

Q. 1.4

For each of the following transactions, show the effect (as pluses and minuses) on assets, liabilities and equity. The first has been completed for illustration.

Assets Liabilities Equity
£ £ £
1 The owner starts the business with £3,000 paid into a business bank account on 1 April +3,000

(bank)

+3,000

(equity)

2 The business buys machinery with a
bank payment of £800 on 2 April
3 The business buys an office
computer for £800 from Dart
Tech on 4 April and agrees to pay
in May
4 On 5 April, a bank lends the
business £10,000 which is paid into
the bank account on the same day
5 The business pays Dart Tech £800
by bank transfer on 1 May
6 The owner takes £100 from the bank
for personal spending money
Summary (overall change)

Step-by-Step

Verified Solution

Assets Liabilities Equity
£ £ £
1 The owner starts the business with £3,000 paid into a business bank account on 1 April +3,000

(bank)

+3,000

(equity)

2 The business buys machinery with a
bank payment of £800 on 2 April
+800
(machinery)
– 800
(bank)
3 The business buys an office
computer for £800 from Dart
Tech on 4 April and agrees to pay
in May
+800
(computer)
+800
(trade
payable:
Dart Tech)
4 On 5 April, a bank lends the
business £10,000 which is paid into
the bank account on the same day
+10,000
(bank)
+10,000
(loan)
5 The business pays Dart Tech £800
by bank transfer on 1 May
-800 (bank) -800
(trade
payable:
Dart Tech)
6 The owner takes £100 from the bank
for personal spending money
-100 (bank) -100
(equity)
Summary (overall change) +12,900 +10,000 +2,900