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AE for Prepaid Expenses

If payment is...

Question

If payment is made to a creditor, indicate how accounting equation will be affected?

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Solution

Cash decreases and so does the liability (creditor).

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When amount is paid to creditors, what will be the impact in accounting equation?

The payment to a creditor will be shown on ___?

Q. Prepare Accounting Equation on the basis of the following transactions:
(a) Started business with cash ₹ 70,000.
(b) Credit purchase of goods ₹ 18,000.
(c) Payment made to creditors in full settlement ₹ 17,500.
(d) Purchase of machinery for cash ₹ 20,000.

Q. When money is paid to the creditors, the value of assets will in the accounting equation.

Q. Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash ₹ 70,000.
(ii) Credit purchase of goods ₹ 18,000.
(iii) Payment made to creditors in full settlement ₹ 17,500.
(iv) Purchase of machinery for cash ₹ 20,000.
(v) Depreciation on machinery ₹ 2,000.

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