Every transaction alters the fundamental accounting equation ($A = L + E$). Analyze the business event, set the net impact on each element, and prove the equation balances!
Transaction: 1/7
Score: 0
Streak: 0 🔥
Business Event
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Assets
=
Liabilities
+
Equity
Audit Complete!
Impact Score:
Lesson: Equation Impact Mechanics
Every economic transaction must keep $\text{Assets} = \text{Liabilities} + \text{Stockholders' Equity}$ in balance. Common patterns include:
Transaction Type
Assets
Liabilities
Equity
Asset Exchange (e.g., Buy supplies for cash)
No Net Effect (+/−)
No Effect
No Effect
Buy on Credit (e.g., Buy equipment on account)
▲ Increase
▲ Increase
No Effect
Settle Debt (e.g., Pay cash on Accounts Payable)
▼ Decrease
▼ Decrease
No Effect
Earn Revenue (e.g., Service billed on account)
▲ Increase
No Effect
▲ Increase
Incur Expense (e.g., Pay rent or utilities in cash)