Question

1. Which balance sheet accounts would be affected by the following transactions? Indicate at least two accounts with each transaction.

1. Sarah opens a money market deposit account with $5,000. The funds are lent in the overnight market for one week.
2. Just as a real estate developer pays off a strip shopping mall loan, a new resident optometrist takes out a mortgage on a home.
3. The bank hires an investment banker to sell shares of stock to the public. It plans to use the proceeds to finance additional commercial loans.

Answer 1

a) Credit or decrease the cash account, and debit or increase the drawing account. The cash account is listed in the assets section of the balance sheet. For example, withdraw $5,000 from sole proprietorship, credit cash and debit the drawing account by $5,000

b)

	Loan A/C	Debit	Debit the decrease in liability
	Interest on Loan A/C	Debit	Debit the increase in expense
	To Bank A/C	Credit	Credit the decrease in Asset

Mortgage Payable Account increases

c) There is no decrease or increase because this option doesn't have any relation with the accounting term.