The bank statement reflected interest on the favourable balance of R940 solve this accounting equation [Assets = Owners equity(R) + liabilities (R)]

Accounting

ScanSolve AI Answer

Step-by-step solution

5 steps

  1. Analyze the transaction.

    Interest on a favourable bank balance means the business is receiving interest income.

  2. Determine the impact on Assets.

    The bank balance (an asset) increases because the business receives interest.

    Assets=+R940\text{Assets} = + \text{R}940

  3. Determine the impact on Owners' Equity.

    Interest income is a revenue, and revenues increase Owners' Equity.

    Owners’ Equity=+R940\text{Owners' Equity} = + \text{R}940

  4. Determine the impact on Liabilities.

    This transaction does not involve any liabilities.

    Liabilities=R0\text{Liabilities} = \text{R}0

  5. Apply to the accounting equation.

    Assets=Owners’ Equity+Liabilities\text{Assets} = \text{Owners' Equity} + \text{Liabilities} +R940=+R940+R0+ \text{R}940 = + \text{R}940 + \text{R}0

    The equation remains balanced.

    The solution is:

    • Assets: Increase by R940
    • Owners' Equity: Increase by R940
    • Liabilities: No change

    Assets (+R940)=Owners’ Equity (+R940)+Liabilities (R0)\boxed{\text{Assets (+R940)} = \text{Owners' Equity (+R940)} + \text{Liabilities (R0)}}

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