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Financial & Managerial Accounting
Found in: Page 95
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Question: The expanded accounting equation consists of assets, liabilities, common stock, dividends, revenues, and expenses. It can be used to reveal insights into changes in a company’s financial position.


1. Form learning teams of six (or more) members. Each team member must select one of the six components, and each team must have at least one expert on each component: (a) assets, (b) liabilities, (c) common stock, (d) dividends, (e) revenues, and ( f ) expenses.

2. Form expert teams of individuals who selected the same component in part 1. Expert teams are to draft a report that each expert will present to his or her learning team addressing the following:

c. Using the transaction and amounts in (b), verify the equality of the accounting equation and then explain any effects on the income statement and statement of cash flows.

3. Each expert should return to his/her learning team. In rotation, each member presents his/her expert team’s report to the learning team. Team discussion is encouraged.


Total assets have been increased by $19,000, liabilities by $4,000, Equity by $10,000 and Revenue by $5,000.

See the step by step solution

Step by Step Solution

Step 1: Accounting equation

The accounting equation is the horizontal form of expressing the double-entry system. Under this equation, all the assets are shown on the left side of the equation, and the liabilities and assets are shown on the right side of the equation. The sum of all assets equals the sum of all liabilities and capital.

Step 2: Accounting equation for described transactions in (b)

Assets = Liabilities + Equity



+ $5,000


+ $4,000



Accounts payable

+ $4,000





+ $5,000







Most popular questions for Business-studies Textbooks

Question: Denzel Brooks opened a web consulting business called Venture Consultants and completed the following transactions in March.

March 1 Brooks invested $150,000 cash along with $22,000 in office equipment in the company in exchange for common stock.

2 The company prepaid $6,000 cash for six months’ rent for an office. (Hint: Debit Prepaid Rent for $6,000.)

3 The company made credit purchases of office equipment for $3,000 and office supplies for $1,200. Payment is due within 10 days.

6 The company completed services for a client and immediately received $4,000 cash.

9 The company completed a $7,500 project for a client, who must pay within 30 days.

12 The company paid $4,200 cash to settle the account payable created on March 3.

19 The company paid $5,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $5,000.)

22 The company received $3,500 cash as partial payment for the work completed on March 9.

25 The company completed work for another client for $3,820 on credit.

29 The company paid $5,100 cash in dividends.

30 The company purchased $600 of additional office supplies on credit.

31 The company paid $500 cash for this month’s utility bill.


2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column

format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128);

Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); Common Stock (307);

Dividends (319); Services Revenue (403); and Utilities Expense (690). Post the journal entries from

part 1 to the ledger accounts and enter the balance after each posting.


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