Question

Identify the impact on the accounting equation, if and how it affects net income, and if and how it affects cash.

Using the following as an example:  Purchased merchandise inventory for cash: assets: + inventory and - cash; no effect on liabilities or equity; no effect on net income, - cash

Please explain the reasoning and how to solve the problem.

1. Paid cash for selling and administrative expenses.

2. Paid cash on accounts payable not within the discount period.

3. Paid cash for transportation-in.

4. Collected cash from accounts receivable.

5. Paid cash for transportation-out.

Answer 1

Paid cash for selling and administrative expenses	Cash Decrease	no effect on liabilities or equity	Net Income Decrease
Paid cash on accounts payable not within the discount period.	Cash Decrease	Liabilities decrease -Account Payable Decrease	no effect on net income
Paid cash for transportation-in.	Inventory increase & Cash Decrease	no effect on liabilities or equity	no effect on net income
Collected cash from accounts receivable.	Cash Increase & Account Receivable Decrease	no effect on liabilities or equity	no effect on net income
Paid cash for transportation-out	Cash Decrease	no effect on liabilities or equity	Net Income Decrease