Accounting Equation online exercise for - Free Printable

Let's solve each part of the worksheet step by step.

---

1. List the 3 Ways that the accounting equation can be written.

The accounting equation is a fundamental principle in accounting and states:

> Assets = Liabilities + Capital

This can be rewritten in three different forms, depending on what you're solving for.

A. Assets = Liabilities + Capital
B. Capital = Assets – Liabilities
C. Liabilities = Assets – Capital

✔ These are the three standard ways to write the accounting equation.

---

2. Effects of Transactions on Accounts

We need to identify two accounts affected and whether they increase or decrease for each transaction.

| Type of Transaction | Effect | Effect |
|---------------------|--------|--------|
| Owner pays capital into Bank $40,000 | Bank - Increase | Capital - Increase |
| Purchase premise on cheque $10,000 | Premises (Asset) - Increase | Bank - Decrease |
| Buy goods on credit $5,000 | Inventory (or Purchases) - Increase | Creditors (Liability) - Increase |
| Sales of goods for cash $4,000 | Cash (Bank) - Increase | Sales (Revenue) - Increases (but note: revenue increases capital indirectly) → But in terms of accounts, we say: Cash increases, Inventory decreases (if using perpetual inventory), OR Sales increases, but since it's not an asset/liability, better to say: Cash increases, Capital increases (via profit). However, typically in basic accounting, we consider: Cash increases, Sales increases (but sales is not an account in the equation directly). So best to think in terms of assets and capital. Actually, for simplicity in this context: Cash increases, Capital increases (due to profit from sale). But wait — if it's cash sale, then:
- Cash increases
- Sales increases → which increases capital via retained earnings.
But in basic accounting equations, we often just show:
→ Cash increases, Capital increases (as the sale generates profit)
But actually, inventory decreases too. So more accurate:

Let’s clarify:

For sales of goods for cash $4,000:
- Cash increases (asset ↑)
- Inventory decreases (asset ↓) → but only if cost of goods sold is considered
- Or, if it's revenue, then capital increases due to profit

But since we’re focusing on two accounts affected, and assuming no cost of goods sold mentioned, and it's a basic level, we’ll assume:
→ Cash increases, Capital increases (due to sales revenue)

But in reality, sales doesn't directly appear in the accounting equation; instead, capital increases.

So, safest answer:
→ Cash - Increase, Capital - Increase

However, if goods are sold, inventory decreases. So two accounts:
→ Cash - Increase, Inventory - Decrease

But the question asks for two accounts and their effect.

In basic accounting, when goods are sold for cash:
- Cash increases
- Sales revenue increases, which increases capital

But again, sales is not an asset or liability.

So, best approach: use assets and capital.

Alternatively, some systems use:
- Cash ↑
- Inventory ↓ (cost of goods sold)

But without cost given, maybe assume only cash and capital.

But let's go with standard double-entry:

Transaction: Sales of goods for cash $4,000
- Debit: Cash (asset ↑)
- Credit: Sales (which increases capital)

So:
→ Cash - Increase, Capital - Increase

Similarly, for buy goods on credit:
- Inventory ↑ (asset)
- Creditors ↑ (liability)

So final table:

| Type of transaction | Effect | Effect |
|---------------------|--------|--------|
| Owner pays capital into Bank $40,000 | Bank - Increase | Capital - Increase |
| Purchase premise on cheque $10,000 | Premises - Increase | Bank - Decrease |
| Buy goods on credit $5,000 | Inventory - Increase | Creditors - Increase |
| Sales of goods for cash $4,000 | Cash - Increase | Capital - Increase |
| Pay creditor $2,000 | Bank - Decrease | Creditors - Decrease |

✔ This is correct.

---

3. List the missing values in the space provided

Use the Accounting Equation:
Assets = Liabilities + Capital

We'll solve each row:

#### Row 1:
- Assets = $13,000
- Liabilities = $2,300
- Capital = ?

Capital = Assets – Liabilities = 13,000 – 2,300 = $10,700

#### Row 2:
- Assets = $28,500
- Liabilities = $5,400
- Capital = ?

Capital = 28,500 – 5,400 = $23,100

#### Row 3:
- Assets = $17,300
- Capital = $13,000
- Liabilities = ?

Liabilities = Assets – Capital = 17,300 – 13,000 = $4,300

#### Row 4:
- Assets = $20,100
- Capital = $16,950
- Liabilities = ?

Liabilities = 20,100 – 16,950 = $3,150

#### Row 5:
- Liabilities = $6,800
- Capital = $19,700
- Assets = ?

Assets = Liabilities + Capital = 6,800 + 19,700 = $26,500

#### Row 6:
- Liabilities = $12,150
- Capital = $40,250
- Assets = ?

Assets = 12,150 + 40,250 = $52,400

---

✔ Final Answers:

---

1. Three ways of the Accounting Equation:

A. Assets = Liabilities + Capital
B. Capital = Assets – Liabilities
C. Liabilities = Assets – Capital

---

2. Effects of Transactions:

| Type of transaction | Effect | Effect |
|---------------------|--------|--------|
| Owner pays capital into Bank $40,000 | Bank - Increase | Capital - Increase |
| Purchase premise on cheque $10,000 | Premises - Increase | Bank - Decrease |
| Buy goods on credit $5,000 | Inventory - Increase | Creditors - Increase |
| Sales of goods for cash $4,000 | Cash - Increase | Capital - Increase |
| Pay creditor $2,000 | Bank - Decrease | Creditors - Decrease |

---

3. Missing Values:

| Assets | Liabilities | Capital |
|--------|-------------|---------|
| $13,000 | $2,300 | $10,700 |
| $28,500 | $5,400 | $23,100 |
| $17,300 | $4,300 | $13,000 |
| $20,100 | $3,150 | $16,950 |
| $26,500 | $6,800 | $19,700 |
| $52,400 | $12,150 | $40,250 |

---

✔ All solved! Let me know if you'd like this formatted as a printable sheet.