Applying the Accounting Equation

Show the effect on the accounting equation for each of the following transactions for Savers Inc. for the month of January.

a. Purchased inventory on account from supplier.

b. Sold inventory on account to customer.

c. Collected cash from customer account.

d. Paid cash to supplier on account.

e. Paid a dividend to shareholders.

Note: Two journal entries were recorded for transaction b. The effect on the accounting equation related to recording the revenue is provided. Select the appropriate effect on the accounting equation for the second journal entry.

Transaction	Effect On Accounting Equation
a. Purchased inventory on account from supplier.	Decrease in assets, decrease in liabilitiesDecrease in assets, decrease in stockholders' equityIncrease in assets, increase in liabilitiesIncrease in assets, increase in stockholders' equityIncrease in one asset account, decrease in another asset accountIncrease in one liability account, decrease in another liability account
b. Sold inventory on account to customer.	Increase in assets, increase in stockholders' equity
	Decrease in assets, decrease in liabilitiesDecrease in assets, decrease in stockholders' equityIncrease in assets, increase in liabilitiesIncrease in assets, increase in stockholders' equityIncrease in one asset account, decrease in another asset accountIncrease in one liability account, decrease in another liability account
c. Collected cash from customer account.	Decrease in assets, decrease in liabilitiesDecrease in assets, decrease in stockholders' equityIncrease in assets, increase in liabilitiesIncrease in assets, increase in stockholders' equityIncrease in one asset account, decrease in another asset accountIncrease in one liability account, decrease in another liability account
d. Paid cash to supplier on account.	Decrease in assets, decrease in liabilitiesDecrease in assets, decrease in stockholders' equityIncrease in assets, increase in liabilitiesIncrease in assets, increase in stockholders' equityIncrease in one asset account, decrease in another asset accountIncrease in one liability account, decrease in another liability account
e. Paid a dividend to shareholders.	Decrease in assets, decrease in liabilitiesDecrease in assets, decrease in stockholders' equityIncrease in assets, increase in liabilitiesIncrease in assets, increase in stockholders' equityIncrease in one asset account, decrease in another asset accountIncrease in one liability account, decrease in another liability account