Elain's inflatables earns service revenue by providing party planning services and inflatable playscapes. elaine? 's inflatables is organized as a sole proprietorship and owned by elaine gibson. during the past? month, elaine? 's inflatables has the following? transactions: a. gibson contributed $10,000 to the business in exchange for capital.
b. purchased equipment for $5,000 on account. c. paid $400 for office supplies. d. earned and received $2,500 cash for service revenue. e. paid $400 for wages to employees. f. gibson withdrew $1,000 cash. g. earned $1,000 for services provided. customer has not yet paid. h. paid $1,000 for rent. i. received a bill for $250 for the monthly utilities. the bill has not yet been paid. question: indicate the effects of the business transactions on the accounting equation for elaine? 's inflatables. transaction? (a) is answered as a guide: a. gibson contributed $10,000 to the business in exchange for capital. a. example: increase asset (cash) ; increase equity (gibson, capital)b. purchased equipment for $5,000 on account? b. decrease asset? / accounts payable? / ; decrease asset? / accounts payable?

The effects of the transactions on the accounting equation are as follows:

The accounting equation for Elain's Inflatables is assets = liabilities + equity.

a. Increase Assets (Cash) $10,000  

Increase Equity (Capital, Elaine Gibson) $10,000

b. Increase Assets (Equipment) $5,000  

Increase Liabilities (Accounts Payable) $5,000

c. Increase Assets (Office Supplies) $400

Decrease Assets (Cash) $400

d. Increase Assets (Cash) $2,500

Increase Equity (Service Revenue) $2,500

e. Decrease Equity (Wages Expense) $400

Decrease Assets (Cash) $400

f. Decrease Equity (Drawings, Elaine Gibson) $1,000

Decrease Assets (Cash) $1,000

g. Increase Assets (Accounts Receivable) $1,000

Increase Equity (Service Revenue) $1,000

h. Decrease Equity (Rent Expense) $1,000

Decrease Assets (Cash) $1,000

i. Decrease Equity (Utilities Expense) $250

Increase Liabilities (Accounts Payable) $250

Data Analysis:

a. Cash $10,000 Capital, Elaine Gibson $10,000

b. Equipment $5,000 Accounts Payable  $5,000

c. Office Supplies $400 Cash $400

d. Cash $2,500 Service Revenue $2,500

e. Wages Expense $400 Cash $400

f. Drawings, Elaine Gibson $1,000 Cash $1,000

g. Accounts Receivable $1,000 Service Revenue $1,000

h. Rent Expense $1,000 Cash $1,000

i. Utilities Expense $250 Accounts Payable $250

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B. Purchased equipment for $5,000 on account?

Increased asset (plant, property, and equipment).

Increased liability (accounts payable)

C. Paid $400 for office supplies.

Increased asset (office supplies)

Decreased liability (cash)

D. Earned and received $2,500 cash for service revenue.

Increased asset (cash)

Increased revenue (service revenues)

E. Paid $400 for wages to employees.

Increased expense (wage expense)

Decreased asset (cash)

F. Gibson withdrew $1,000 cash.

Increased asset (cash)

Decreased asset (bank account)

G. Earned $1,000 for services provided. Customer has not yet paid

Increased asset (accounts receivable)

Increased revenue (accrued revenue)

H. Paid $1,000 for rent.

Increased expense (rent)

Decreased asset (cash)

I. Received a bill for $250 for the monthly utilities. The bill has not yet been paid.

Increased liability (accrued expense)

Increased expense (utilities)

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