Match each transaction with its effect on the accounting equation. Each letter may be used more than once. Clear All Received payment from a customer on account Payment of dividends Provided a service to a customer on account Purchased supplies on credit Paid wages Increase liabilities, decrease stockholders' equity Increase assets, increase liabilities Decrease assets, decrease stockholders' equity No effect Increase assets, increase stockholders' equity

All Received payment from a customer on account -  No effect

Payment of dividends - Decrease in cash, decrease stockholders' equity

Provided a service to a customer on account - Increase asset, increase stockholders' equity

Purchased supplies on credit - Increase assets, increase liabilities

Paid wages - Decrease assets, decrease stockholders' equity

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as

Assets = Liabilities + Equity

While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

All Received payment from a customer on account is a change between two assets; accounts receivable and cash.

Payment of dividend reduces cash and equity. Service provision on account increases account receivable and revenue (which in turn increases equity)

Supplies purchased on account increases inventory and accounts payable.

Wages paid reduces cash and increases expense (which in turn reduces equity)

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