Show effects of each transaction using the accounting equation
Daphne invested gh3000 cash and gh15,000 of equipment on 1st January 2020
To determine the effects of each transaction using the accounting equation, let's break down the given transactions:
Transaction 1: Daphne invested GH3000 cash.
The accounting equation, also known as the fundamental equation of accounting, is:
Assets = Liabilities + Equity.
Initially, Daphne has no liabilities or equity as she is the sole owner. Therefore, the equation can be simplified to:
Assets = Equity.
Before the investment:
Assets = 0
Equity = 0
Since Daphne invested GH3000 cash, the effect can be recorded as:
Assets (Cash) + GH3000
Equity (Owner's Equity) + GH3000
After the investment:
Assets = GH3000
Equity = GH3000
Transaction 2: Daphne invested GH15,000 of equipment.
The effect can be recorded as:
Assets (Equipment) + GH15000
Equity (Owner's Equity) + GH15000
After the second investment, the updated amounts will be:
Assets = GH3000 + GH15000 = GH18000
Equity = GH3000 + GH15000 = GH18000
Hence, after both transactions, the accounting equation can be represented as:
Assets = GH18000
Equity = GH18000