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:
|
Assets |
+ |
Liabilities + |
Owner’s Equity |
|
Cash |
Land |
Sheena Bright, Capital |
|
|
(1)30,000 |
= |
? |
|
|
+ ? |
||
|
Bal 10,000 |
20,000 |
? |
|
|
? |
|||
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.
Answer:
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| Purchase ofLand | ||||||||
| ASSETS | LIABILITIES | OWNER’SEQUITY | ||||||
| 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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