Transaction 2: Purchase of Lan

Transaction 2: Purchase of Land

View all the transactions, and do allthe accounting, from the perspective of the business – not from theviewpoint of the proprietor/owner. The business purchases land foran office location, paying cash of $20,000. This transactioneffects the accounting effect the accounting equation of SmartTouch Learning as follows:



Liabilities          +

Owner’s Equity



Sheena Bright, Capital




  1.     ?

+        ?

Bal 10,000




The cash purchase of land increases one asset, Land, anddecreases another asset, Cash. After the transaction is completed,the business has cash of $10,000, land of $20,000, no liabilities,and owner equity of $30,000. Note that the total balances on bothsides of the equation must always be equal.


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Purchase ofLand
Cash + OfficeSupplies + Land = AccountsPayable + Sheena Bright,Capital
   30,000.00 + + = +                       30,000.00
(20,000.00) + + 20,000.00 = +
  10,000.00 +                        –   + 20,000.00 =                             –   +                       30,000.00

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