The following transactions occur for the Hamilton Manufacturers. (a) Provide services to customers on account for $4,600. (b) Purchase equipment by signing a note with the bank for $10,200. (c) Pay advertising of $1,000 for the current month.

Question wants to know how the Accounting equation is affected by these transactions.

a. Provide services to customers on account for $4,600.

Assets will increase by $4,600.

Equity will increased by $4,600

This is because, Accounts receivable will increase on account of these services being offered on account and it is an Asset account.

This transaction also brings in revenue which is an equity account so Equity will increase as well.

b. Purchase equipment by signing a note with the bank for $10,200.

Assets will increase by $10,200

Liabilities will increase by $10,200

Equipment is an asset which is why assets are increasing. This purchase was funded by a Note which is a liability so liabilities increase as well.

c.  Pay advertising of $1,000 for the current month.

Assets decrease by $1,000.

Equity decrease by $1,000.

The advertising was paid for by cash so cash (asset) will reduce as a result. Advertising is an expense and expenses reduce revenue which is in equity so Equity reduces as well.

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