Illustration 1.8 summarizes the September transactions of Softbyte to show their cumulative effect on the basic accounting equation. It also indicates the transaction number and the spe- cific effects of each transaction. Illustration 1.8 demonstrates some significant facts: 1. Each transaction is analyzed in terms of its effect on: a. The three components of the basic accounting equation (assets, liabilities, and owner's equity). b. Specific types (kinds) of items within each component (such as the asset Cash). 2. The two sides of the equation must always be equal. 3. The Owner's Capital Owner's Drawings, Revenues, and Expenses columns indicate the causes of each change in the owner's claim on assets. ILLUSTRATION 1.8 Tabular summary of Softbyte transactions Owner's Equity Owner's Drawings + Rex Exp. Initial invest +$1,200 Assets = Liabilities + Trans- Accounts Accounts Owner's action Cash + Receivable + Supplies + Equipment = Payable + Capital (1) +$15,000 + $15.000 (2) -7,000 +$7,000 (3) +91,600 +$1,600 (4) +1.200 (5) +250 (6) +1.500 +$2,000 (7) -600 -900 -200 (8) -250 -250 (9) +600 -600 (10) -1.300 $ 8.050+ $1,400 $1,600 $1,600 + $15.000 +3.500 Service Revenue -$250 Adver. Expense Service Revenue -600 Rent Expense 900 Sal/Wages Exp -200 ilities Expo -$1.300 $1.300 + $4,700 Drawings S1.950 + $7.000 Il $18,050 518,050 There! You made it through your first transaction analysis. If you feel a bit shaky on any of the transactions, it might be a good idea at this point to get up, take a short break, and come back again for a brief (10-to 15-minute) review of the transactions, to make sure you under stand them before you go on to the next section. DO IT! 4 Tabular Analysis Transactions made by Virmari & Co., a public accounting firm, for the month of August are shown below. Prepare a tabular analysis which shows the effects of these transactions on the expanded accounting equation, similar to that shown in Illustration 1.8. 1. The owner invested $25,000 cash in the business. 2. The company purchased $7,000 of office equipment on credit. 3. The company received $8,000 cash in exchange for services performed. 4. The company paid $850 for this month's rent. 5. The owner withdrew $1,000 cash for personal use. ACTION PLAN Analyze the effects of each transaction on the accounting equation . Use appropriate category names (not descriptions). Keep the accounting equation in balance