Answer to Question #207968 in Accounting for zohaib

Question

Give examples of transactions that would have the following effects on the items in a firm’s
financial statements:
a. Increase cash; decrease some other asset.
b. Decrease cash; increase some other asset.
c. Increase an asset; increase a liability.
d. Decrease retained earnings; decrease an asset.
e. Increase an asset other than cash; increase retained earnings.
f. Decrease an asset; decrease a liability

Answer 1

a. When a firm's debtor pays their debt through cash. (It increases cash; decreases account receivables)

b. When a firm buys furniture and fixtures using cash (It decreases cash; increases furniture and fixtures)

c. When a firm buys stock on credit (It increases account inventory; increases account payable)

d. When a firm pays its shareholders' dividends (It decreases cash; decreases retained earnings)

e. When a firm raises customer prices on its credit goods (It increases account receivables; it increases retained earnings through increase in net income)

f. When a firm pays its supplier invoices (It decreases cash; decreases account payable)