Give an example of the following tranactions
•Increase an asset and increase a liability.
•Increase one asset and decrease another asset.
•Decrease an asset and decrease owner's equity.
•Decrease an asset and decrease a liability.
•Increase an asset and increase owner's equity.
Sure! Here are examples of each of the transactions you mentioned:
1. Increase an asset and increase a liability:
Let's consider a scenario where a business takes out a bank loan.
- To increase the asset (cash), the business would debit the Cash account.
- To increase the liability (loan), the business would credit the Loan Payable account.
2. Increase one asset and decrease another asset:
Suppose a business sells some of its inventory for cash.
- To increase the asset (cash), the business would debit the Cash account.
- To decrease the asset (inventory), the business would credit the Inventory account.
3. Decrease an asset and decrease owner's equity:
Let's imagine a business owner withdraws cash from the company for personal use.
- To decrease the asset (cash), the business would credit the Cash account.
- To decrease owner's equity, we specifically refer to the withdrawal as a "draw" or "dividend." The business would debit the Owner's Drawings or Dividends account.
4. Decrease an asset and decrease a liability:
Consider a scenario where a business pays off a portion of its outstanding loan.
- To decrease the asset (cash), the business would credit the Cash account.
- To decrease the liability (loan), the business would debit the Loan Payable account.
5. Increase an asset and increase owner's equity:
Let's say a business receives an investment from the owner.
- To increase the asset (cash), the business would debit the Cash account.
- To increase owner's equity, we specifically refer to the contribution as "contributed capital" or "owner's investment." The business would credit the Capital or Owner's Equity account.
Remember, these examples follow the basic principles of double-entry bookkeeping, where every transaction has at least two entries to maintain the accounting equation's balance.