00:01
In this question, you've asked to prepare an accounting equation and a balance sheet for the following transactions.
00:08
First, the accounting equation is assets equals liabilities plus equity.
00:17
Let's do transaction one by one.
00:19
The first transaction is that we started a business with $1 ,500 ,000 cash.
00:26
Cash is an asset, so my assets would go up by $1 .5 million.
00:31
And we would also have equity or investment or owner's investment go up by $1 .5 million.
00:40
It says we bought goods for cash $80 ,000 and on credit $40 ,000 total $120 ,000 of inventory.
00:51
Inventory is an asset.
00:54
My assets increased by $120 ,000.
00:57
It says we paid $80 ,000 cash.
01:00
Cash is an asset, so cash would go down 80 ,000.
01:05
But we put 40 ,000 on credit.
01:08
That would increase my accounts payable, which is a liability, showing i owe money.
01:15
Next, it says we sold goods at $75 ,000.
01:20
We would have sales revenue increase under equity for $75 ,000.
01:29
They said we received half of money.
01:32
The payment in cash, half would be 37 ,500, and we are still waiting on half.
01:40
When you're waiting on money, that's accounts receivable...