| LG 8-6. |
| Transaction | Assets decreased or liabilities increased? |
Expense? | Why
is it an expense or not an expense? |
A | = | L | + | OE |
| a.
The business pays off a loan of $10,000. |
Yes
(The asset Cash decreases.) |
No | Only
creditors’ equity is affected, not the owner’s. |
 |
|
|||
| b.
$1,500 of supplies are used up. |
Yes
(The asset Supplies is used up.) |
Yes | A
direct using up of resources in operations. |
|
|
|||
| c.
A business pays off an account payable of $1,500. |
Yes
(The asset Cash decreases.) |
No | Paying
a liability is never an expense; it affects the creditor’s equity, not the owner’s. |
|
| |||
| d.
A business pays employees $1,500 in wages as soon as they are earned. |
Yes
(The asset Cash decreases.) |
Yes | Asset
used up in operations to pay for employee services. |
|
|
|||
| e.
A business receives a $750 repair bill for this month’s computer repair services. The bill is not paid immediately. |
Yes
(The liability Accounts Payable increases.) |
Yes | A
new claim is placed on existing assets because of a service consumed and not paid for. |
 |
|
Learning
Goal 8, continued
SOLUTIONS
| S4 |
Section
II · Transactions—Analyzing and Visualizing
|
|
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