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1 9: Changes in Stockholders’ Equity Business LibreTexts

statement of cash

These are made by debits and credits and for every entry, the sum of debits must equal the sum of credits. Our examples will also show the effect of each transaction on the balance sheet and income statement. For all of our examples we assume that the accrual basis of accounting is being followed. The three elements of the accounting equation are assets, liabilities, and equity.

You need to know this formula to answer the question Beginning Retained Earn… Sold additional stock to investors for $1,000 cash. Had a total of $1,288,500,000 in stored value card liability. You have the following transactions the last few days of April. A. A service is performed, but the payment is not collected on the same day. Since the statement is mathematically correct, we are confident that the net income was $64,000.


This will your liabilities. Liabilities increase with credit entries.

  • This is posted to the Cash T-account on the credit side.
  • Instead, they are a component of the stockholder’s equity account, placing it on the right side of the accounting equation.
  • Whenever a transaction affects only one side of the accounting equation, both assets and liabilities and owners’ equity remain unchanged.
  • The creditors provided $7,000 and the stockholders provided $9,300.
  • The following are selected journal entries from Printing Plus that affect the Cash account.
  • Regardless of how the accounting equation is represented, it is important to remember that the equation must always balance.

The will increase when the service or product is provided and stockholders’ equity will increase through net income into retained earnings. You paid, which means you gave cash so you have less cash. To decrease the total cash, credit the account because asset accounts are reduced by recording credit entries.

Subject 4. Effects of Transactions on the Accounting Equation

You believe the company got a really good deal because the van has a $13,000 Blue Book value. Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. The equation helps support the double-entry accounting system which indicates that every entry has an opposing credit entry. Expense account and a credit to a liability account. For example, a company uses $400 worth of utilities in May but is not billed for the usage, or asked to pay for the usage, until June. Even though the company does not have to pay the bill until June, the company owed money for the usage that occurred in May.