Question01: Selected transactions for Anil service Company are listed below.

1. Made cash investment to start business.

2. Paid monthly rent.

3. Purchased equipment on account.

4. Billed customers for services performed.

5. Withdrew cash for owner’s personal use.

6. Received cash from customers billed in (4).

7. Incurred advertising expense on account.

8. Purchase additional equipment for cash. 9. Received cash from

customers when service was performed. ANSWERS:

1. Increase in asset and increase in owners equity.

An asset of cash has increased which has a debit nature and also the owners equity(capital)
increased which have a credit nature.
2. Decrease in asset.

An asset of cash has decreased due to payment of monthly rent(an expense)which in return
cause an Increase in the expense account. Cash account is credited while an expense(rent)
account is debited.

3. Increase of assets and decrease of assets.

An Increase of asset on equipment(non current asset) due to purchases made that also cause a
decrease of asset on bank. Equipment account is debited whereas bank account is credited.

4. Increase of asset.

An asset of the trade receivables has increased which also cause the creditors to increase. Trade
receivables account is debited while the creditors account(customer) is credited.

5. Decrease in owners equity and decrease of assets.

The owners equity is decreased due to withdraw of cash for owners personal use which also
cause a decrease of asset on cash. Owners equity account is debited whereas a cash account is
credited.

6. Increase in asset and decrease of asset.

An asset of cash increases due to payment from customer which also cause a decrease of trade
receivables (current asset). Cash account is debited while trade receivables account is credited.

7. Decrease of asset.

An asset of bank decreases due to payment of advertising expenses and thus expenses
increases. Bank account is credited whereas expenses account is debited
8. Increase of assets and decrease of asset.

An asset of equipment increase whereas cash decrease due to purchases made. Equipment
account debited while cash account is credited.

9. Increase in asset.

An asset of cash increases due to payment received after service provision also revenues
increase. Cash account is debited while revenue account credited.