How does the purchased of equipment affect the accounting equation?
The purchase of an equipment would only result to an increase in an asset (Equipment) and a decrease in another asset (Cash) in the same amount which would result to the same total amount of assets, liabilities and equity, and will not affect the basic accounting equation.
What is the transaction when a company purchases equipment on account?
In the example of purchasing equipment on account, you gained an assets (the equipment). Since you purchased it on account, cash wasn't involved, and you now owe a business for the equipment. The general journal entry for this transaction is a debit to Equipment and a credit to Accounts Payable.
What is the effect of an equipment purchased for cash?
Cash exists as a company's most liquid asset. Purchasing office equipment for cash will reduce a company's assets (i.e. reduction in cash in hand). Since owner's equity equals assets minus liabilities, owner's equity will be reduced as a result of buying office equipment with cash.
Which accounts are affected when equipment is purchased with cash?
Answer and Explanation: Equipment purchased with cash causes an increase in the fixed assets because while the current assets decrease. Therefore, the income statement displays a rise in the losses experienced within that period due to equipment purchase expenditures, which causes a decrease in the retained earnings.