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Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity....

Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity. 1. Receive payment of $12,000 owed by a customer 2. Borrow $65,000 from a bank What is the net change in Total Liabilities & Equity?

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Answer #1
Transaction Assets = Liabilities + Equity
1 No Effect = No Effect + No Effect
2 Increase = Increase + No Effect

Net change in Total Liabilities & Equity =  $65,000 increase.

Explanation:

1. Receive payment of $12,000 owed by a customer

Accounts receivable balance decreased by $12,000 & Cash balance increased by $12,000. Since assets increases & decreases at the same time, it results in the net " No Effect". Liabilities & Equity are unaffected by this transaction.

2. Borrow $65,000 from a bank.

Bank / Cash balance increased by $65,000 thus assets increases & Bank Loan account is created in liabilities side thus liabilities also increase by $65,000.

Since the liabilities increase by $65,000, the Total Liabilities & Equity will increase by $65,000.

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