Accounting Equation Explained - Definition & Examples - Free Printable

Let's solve the problem step by step by analyzing each transaction and recording it in the Financial Transaction Worksheet using the accounting equation:

> Assets = Liabilities + Owner’s Equity

We will record each transaction, adjusting the appropriate accounts. Remember:
- Cash increases or decreases with cash inflows/outflows.
- Accounts Receivable increases when services are rendered on credit.
- Computer Supplies and Computer Equipment are assets that increase when purchased.
- Accounts Payable increases when purchases are made on credit.
- Hack, Capital (Owner’s Equity) increases with initial investment and revenue; decreases with withdrawals.
- Expenses reduce owner’s equity.

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Step-by-step Analysis of Transactions:

#### May 1 – Tina Hack started a new business by depositing P250,000
- Cash increases by P250,000
- Owner’s Equity (Hack, Capital) increases by P250,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 1 | +250,000 | | | | | +250,000 |

---

#### May 5 – Computer equipment costing P178,000 is acquired on cash basis
- Cash decreases by P178,000
- Computer Equipment increases by P178,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 5 | -178,000 | | | +178,000 | | |

---

#### May 9 – Computer supplies worth P9,000 purchased on account
- Computer Supplies increase by P9,000
- Accounts Payable increases by P9,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 9 | | | +9,000 | | +9,000 | |

---

#### May 11 – Collected P77,000 in cash for services
- Cash increases by P77,000
- Revenue increases → Owner’s Equity increases by P77,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 11 | +77,000 | | | | | +77,000 |

---

#### May 16 – Paid P15,000 to Bill-Bills Unlimited for utilities
- Cash decreases by P15,000
- Expense (Utilities) → reduces Owner’s Equity

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 16 | -15,000 | | | | | -15,000 |

---

#### May 17 – Billed clients P25,000 for services already rendered
- Accounts Receivable increases by P25,000
- Revenue increases → Owner’s Equity increases by P25,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 17 | | +25,000 | | | | +25,000 |

---

#### May 19 – Made partial payment of P7,000 for May 9 purchase
- Cash decreases by P7,000
- Accounts Payable decreases by P7,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 19 | -7,000 | | | | -7,000 | |

---

#### May 20 – Checks totaling P21,000 received from clients for May 17 billing
- Cash increases by P21,000
- Accounts Receivable decreases by P21,000

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 20 | +21,000 | -21,000 | | | | |

---

#### May 21 – Withdrew P20,000 for personal use
- Cash decreases by P20,000
- Owner’s Equity decreases by P20,000 (drawings)

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 21 | -20,000 | | | | | -20,000 |

---

#### May 27 – Received bill for P8,000 internet ads (to be paid next month)
- Accounts Payable increases by P8,000
- Advertising Expense → reduces Owner’s Equity

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 27 | | | | | +8,000 | -8,000 |

---

#### May 31 – Paid assistant salaries of P15,000
- Cash decreases by P15,000
- Salary Expense → reduces Owner’s Equity

| Date | Cash | AR | Supplies | Equipment | AP | Hack, Capital |
|------|------|----|----------|------------|-----|----------------|
| May 31 | -15,000 | | | | | -15,000 |

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Now, let’s compile all transactions into the worksheet:

| DATE | CASH | ACCOUNTS RECEIVABLE | COMPUTER SUPPLIES | COMPUTER EQUIPMENT | ACCOUNTS PAYABLE | HACK, CAPITAL |
|--------|--------------|---------------------|-------------------|--------------------|------------------|---------------|
| May 1 | +250,000 | | | | | +250,000 |
| May 5 | -178,000 | | | +178,000 | | |
| May 9 | | | +9,000 | | +9,000 | |
| May 11 | +77,000 | | | | | +77,000 |
| May 16 | -15,000 | | | | | -15,000 |
| May 17 | | +25,000 | | | | +25,000 |
| May 19 | -7,000 | | | | -7,000 | |
| May 20 | +21,000 | -21,000 | | | | |
| May 21 | -20,000 | | | | | -20,000 |
| May 27 | | | | | +8,000 | -8,000 |
| May 31 | -15,000 | | | | | -15,000 |
| BALANCES | +113,000 | +4,000 | +9,000 | +178,000 | +10,000 | +294,000 |
| TOTALS | 304,000 | 4,000 | 9,000 | 178,000 | 10,000 | 294,000 |

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Final Balances:

| ASSETS | LIABILITIES | OWNER’S EQUITY |
|--------|-------------|----------------|
| Cash: P113,000 | Accounts Payable: P10,000 | Hack, Capital: P294,000 |
| Accounts Receivable: P4,000 | | |
| Computer Supplies: P9,000 | | |
| Computer Equipment: P178,000 | | |
| Total Assets = P304,000 | Total Liabilities = P10,000 | Total Owner’s Equity = P294,000 |

✔ Accounting Equation Check:
> Assets = Liabilities + Owner’s Equity
> P304,000 = P10,000 + P294,000
> ✔ Balanced!

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✔ Final Answer (Completed Worksheet):

```
DA' HACKERS WEBPAGE EXPRESS
FINANCIAL TRANSACTION WORKSHEET
MONTH OF MAY 2017

DATE | CASH | AR | SUPPLIES | EQUIPMENT | AP | HACK, CAPITAL
---------------------------------------------------------------------------------------------
May 1 | +250,000 | | | | | +250,000
May 5 | -178,000 | | | +178,000 | |
May 9 | | | +9,000 | | +9,000 |
May 11 | +77,000 | | | | | +77,000
May 16 | -15,000 | | | | | -15,000
May 17 | | +25,000 | | | | +25,000
May 19 | -7,000 | | | | -7,000 |
May 20 | +21,000 | -21,000 | | | |
May 21 | -20,000 | | | | | -20,000
May 27 | | | | | +8,000 | -8,000
May 31 | -15,000 | | | | | -15,000
---------------------------------------------------------------------------------------------
BALANCES | 113,000 | 4,000 | 9,000 | 178,000 | 10,000 | 294,000
TOTALS | 304,000 | 4,000 | 9,000 | 178,000 | 10,000 | 294,000
```

✔ Equation is balanced: 304,000 = 10,000 + 294,000

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✔ Summary:

- The accounting equation holds true.
- All transactions have been properly recorded.
- The final balance of Assets = Liabilities + Owner’s Equity is verified.

Let me know if you’d like this in Excel format or need journal entries too!