Kwesi started a business on 1 January 20X4 with the following transactions: a) Show the effect of each transaction on the accounting equation (Assets = Liabilities + Capital) and b) Calculate the final position of assets, liabilities, and capital after all transactions.

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Asked on March 16, 2026Economics

This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.

Accepted Answer · 2026-03-16T09:57:19.780Z

Question 2: a) Show the effect of each transaction on the accounting equation (Assets = Liabilities + Capital) Jan 1: Started business with cash GH₵100,000 Assets (Cash) increase by GH₵100,000. Capital increases by GH₵100,000. Effect: Assets (+GH₵100,000) = Liabilities (0) + Capital (+GH₵100,000) Jan 2: Purchased equipment by cheque GH₵30,000 Assets (Equipment) increase by GH₵30,000. Assets (Bank) decrease by GH₵30,000. Effect: Assets (+GH₵30,000 - GH₵30,000 = 0) = Liabilities (0) + Capital (0) Jan 3: Purchased goods on credit from supplier GH₵20,000 Assets (Inventory) increase by GH₵20,000. Liabilities (Accounts Payable) increase by GH₵20,000. Effect: Assets (+GH₵20,000) = Liabilities (+GH₵20,000) + Capital (0) Jan 5: Sold goods for cash GH₵15,000 Assets (Cash) increase by GH₵15,000. Capital (Revenue) increases by GH₵15,000. Effect: Assets (+GH₵15,000) = Liabilities (0) + Capital (+GH₵15,000) Jan 8: Paid supplier by cheque GH₵10,000 Assets (Bank) decrease by GH₵10,000. Liabilities (Accounts Payable) decrease by GH₵10,000. Effect: Assets (-GH₵10,000) = Liabilities (-GH₵10,000) + Capital (0) Jan 10: Withdrew cash for personal use GH₵5,000 Assets (Cash) decrease by GH₵5,000. Capital (Drawings) decreases by GH₵5,000. Effect: Assets (-GH₵5,000) = Liabilities (0) + Capital (-GH₵5,000) b) Calculate the final position of assets, liabilities, and capital after all transactions Assets: Cash/Bank: GH₵100,000 (Jan 1) - GH₵30,000 (Jan 2) + GH₵15,000 (Jan 5) - GH₵10,000 (Jan 8) - GH₵5,000 (Jan 10) = GH₵70,000 Equipment: GH₵30,000 (Jan 2) Inventory: GH₵20,000 (Jan 3) Total Assets = GH₵70,000 + GH₵30,000 + GH₵20,000 = GH₵120,000 Liabilities: Accounts Payable: GH₵20,000 (Jan 3) - GH₵10,000 (Jan 8) = GH₵10,000 Capital: Initial Capital: GH₵100,000 (Jan 1) Add: Sales Revenue: GH₵15,000 (Jan 5) Less: Drawings: GH₵5,000 (Jan 10) Total Capital = GH₵100,000 + GH₵15,000 - GH₵5,000 = GH₵110,000 Check: Assets = Liabilities + Capital GH₵120,000 = GH₵10,000 + GH₵110,000 GH₵120,000 = GH₵120,000 Final Position: Assets: GH₵120,000 Liabilities: GH₵10,000 Capital: GH₵110,000 --- Question 3: a) For each transaction, identify the two accounts affected and state whether each account should be debited or credited Jan 1: Started business with GH₵80,000 cash Accounts affected: Cash, Capital Cash: Debit Capital: Credit Jan 2: Paid rent by cash GH₵2,000 Accounts affected: Rent Expense, Cash Rent Expense: Debit Cash: Credit Jan 3: Purchased equipment on credit from ABC Supplies GH₵15,000 Accounts affected: Equipment, Accounts Payable (ABC Supplies) Equipment: Debit Accounts Payable: Credit Jan 5: Purchased goods for cash GH₵10,000 Accounts affected: Purchases, Cash Purchases: Debit Cash: Credit Jan 8: Sold goods for cash GH₵12,000 Accounts affected: Cash, Sales Cash: Debit Sales: Credit Jan 10: Paid ABC Supplies by cheque GH₵8,000 Accounts affected: Accounts Payable (ABC Supplies), Bank Accounts Payable: Debit Bank: Credit Jan 12: Received cash from customer GH₵5,000 Accounts affected: Cash, Accounts Receivable Cash: Debit Accounts Receivable: Credit Jan 15: Paid salaries by cash GH₵3,000 Accounts affected: Salaries Expense, Cash Salaries Expense: Debit Cash: Credit b) Explain the double-entry principle rule applied to each transaction The double-entry principle states that every financial transaction affects at least two accounts, with equal total debits and credits, ensuring the accounting equation (Assets = Liabilities + Capital) remains balanced. Jan 1: Started business with GH₵80,000 cash Cash (an asset) increased, so it is debited. Capital (equity) increased, so it is credited. Jan 2: Paid rent by cash GH₵2,000 Rent Expense (an expense, which reduces capital) increased, so it is debited. Cash (an asset) decreased, so it is credited. Jan 3: Purchased equipment on credit from ABC Supplies GH₵15,000 Equipment (an asset) increased, so it is debited. Accounts Payable (a liability) increased, so it is credited. Jan 5: Purchased goods for cash GH₵10,000 Purchases (an expense/asset) increased, so it

Accepted Answer · 2026-03-16T09:57:19.780Z

Question 2: a) Show the effect of each transaction on the accounting equation (Assets = Liabilities + Capital) Jan 1: Started business with cash GH₵100,000 Assets (Cash) increase by GH₵100,000. Capital increases by GH₵100,000. Effect: Assets (+GH₵100,000) = Liabilities (0) + Capital (+GH₵100,000) Jan 2: Purchased equipment by cheque GH₵30,000 Assets (Equipment) increase by GH₵30,000. Assets (Bank) decrease by GH₵30,000. Effect: Assets (+GH₵30,000 - GH₵30,000 = 0) = Liabilities (0) + Capital (0) Jan 3: Purchased goods on credit from supplier GH₵20,000 Assets (Inventory) increase by GH₵20,000. Liabilities (Accounts Payable) increase by GH₵20,000. Effect: Assets (+GH₵20,000) = Liabilities (+GH₵20,000) + Capital (0) Jan 5: Sold goods for cash GH₵15,000 Assets (Cash) increase by GH₵15,000. Capital (Revenue) increases by GH₵15,000. Effect: Assets (+GH₵15,000) = Liabilities (0) + Capital (+GH₵15,000) Jan 8: Paid supplier by cheque GH₵10,000 Assets (Bank) decrease by GH₵10,000. Liabilities (Accounts Payable) decrease by GH₵10,000. Effect: Assets (-GH₵10,000) = Liabilities (-GH₵10,000) + Capital (0) Jan 10: Withdrew cash for personal use GH₵5,000 Assets (Cash) decrease by GH₵5,000. Capital (Drawings) decreases by GH₵5,000. Effect: Assets (-GH₵5,000) = Liabilities (0) + Capital (-GH₵5,000) b) Calculate the final position of assets, liabilities, and capital after all transactions Assets: Cash/Bank: GH₵100,000 (Jan 1) - GH₵30,000 (Jan 2) + GH₵15,000 (Jan 5) - GH₵10,000 (Jan 8) - GH₵5,000 (Jan 10) = GH₵70,000 Equipment: GH₵30,000 (Jan 2) Inventory: GH₵20,000 (Jan 3) Total Assets = GH₵70,000 + GH₵30,000 + GH₵20,000 = GH₵120,000 Liabilities: Accounts Payable: GH₵20,000 (Jan 3) - GH₵10,000 (Jan 8) = GH₵10,000 Capital: Initial Capital: GH₵100,000 (Jan 1) Add: Sales Revenue: GH₵15,000 (Jan 5) Less: Drawings: GH₵5,000 (Jan 10) Total Capital = GH₵100,000 + GH₵15,000 - GH₵5,000 = GH₵110,000 Check: Assets = Liabilities + Capital GH₵120,000 = GH₵10,000 + GH₵110,000 GH₵120,000 = GH₵120,000 Final Position: Assets: GH₵120,000 Liabilities: GH₵10,000 Capital: GH₵110,000 --- Question 3: a) For each transaction, identify the two accounts affected and state whether each account should be debited or credited Jan 1: Started business with GH₵80,000 cash Accounts affected: Cash, Capital Cash: Debit Capital: Credit Jan 2: Paid rent by cash GH₵2,000 Accounts affected: Rent Expense, Cash Rent Expense: Debit Cash: Credit Jan 3: Purchased equipment on credit from ABC Supplies GH₵15,000 Accounts affected: Equipment, Accounts Payable (ABC Supplies) Equipment: Debit Accounts Payable: Credit Jan 5: Purchased goods for cash GH₵10,000 Accounts affected: Purchases, Cash Purchases: Debit Cash: Credit Jan 8: Sold goods for cash GH₵12,000 Accounts affected: Cash, Sales Cash: Debit Sales: Credit Jan 10: Paid ABC Supplies by cheque GH₵8,000 Accounts affected: Accounts Payable (ABC Supplies), Bank Accounts Payable: Debit Bank: Credit Jan 12: Received cash from customer GH₵5,000 Accounts affected: Cash, Accounts Receivable Cash: Debit Accounts Receivable: Credit Jan 15: Paid salaries by cash GH₵3,000 Accounts affected: Salaries Expense, Cash Salaries Expense: Debit Cash: Credit b) Explain the double-entry principle rule applied to each transaction The double-entry principle states that every financial transaction affects at least two accounts, with equal total debits and credits, ensuring the accounting equation (Assets = Liabilities + Capital) remains balanced. Jan 1: Started business with GH₵80,000 cash Cash (an asset) increased, so it is debited. Capital (equity) increased, so it is credited. Jan 2: Paid rent by cash GH₵2,000 Rent Expense (an expense, which reduces capital) increased, so it is debited. Cash (an asset) decreased, so it is credited. Jan 3: Purchased equipment on credit from ABC Supplies GH₵15,000 Equipment (an asset) increased, so it is debited. Accounts Payable (a liability) increased, so it is credited. Jan 5: Purchased goods for cash GH₵10,000 Purchases (an expense/asset) increased, so it

Kwesi started a business on 1 January 20X4 with the following transactions: a) Show the effect of each transaction on the accounting equation (Assets = Liabilities + Capital) and b) Calculate the final position of assets, liabilities, and capital after all transactions.

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Kwesi started a business on 1 January 20X4 with the following transactions: a) Show the effect of each transaction on the accounting equation (Assets = Liabilities + Capital) and b) Calculate the final position of assets, liabilities, and capital after all transactions.

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