Acca financial Accounting (FA) Study Text ac ca (FA)

Day 3: Obtained a $1,000 loan 

The dual effect of this transaction is: 

(a)

the business has $1,000 of cash

(b)

the business owes $1,000 to the bank.

Assets

 

=

 

Equity

 

+

Liabilities

1,000

1,000

0

 

1,000 

0 

1,000 

––––––––

–––––––– 

–––––––– 

2,000

1,000 

1,000 

Day 4: Purchased goods for $300 cash 

The purchase represents the recognition of a new asset (inventory) and a 

corresponding reduction in the bank account, so there is no change in the 

accounting equation. 

Assets

 

=

 

Equity

 

+

Liabilities

2,000

1,000

1,000

 

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Chapter 3 

KAPLAN PUBLISHING

53 

Day 5: Sold goods for $400 on credit 

The inventory which cost $300 has now been sold for $400, which results 

in a profit of $100. 

The dual effect of this transaction is: 

(a)

The business has increased its assets by $100 – it should record a

receivable of $400 and also record the reduction in inventory of

$300.

(b)

The business has earned profit of $100 – this is an increase in

equity.

The sales revenue will increase profits and will therefore increase equity 

in the business.