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27 March, 21:09

Michael Barry, Attorney, P. C. began the year with total assets of $126,000, liabilities of $74,000, and stockholders' equity of $52,000. During the year, the business earned revenue of $110,000 and paid expenses of $33,000. The business also paid cash dividends of $69,000. How would Michael Barry record expenses paid of $33,000?

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  1. 27 March, 23:42
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    The expenses can be recorded as follows;

    Debit to the expenses of $33,000 and a credit to the cash account of $33,000.

    Explanation:

    The accounting equation is an equation that tends to balance a company's assets on one side and the sum of its liabilities and shareholders equity on the opposite side of the equation. It form the basis for the double-entry system in accounting that includes an accounts debit and credit. The debit is a sum to an amount that is owed, it is usually listed on the left hand-side of an account while the credit is a listing of a sum that is received usually on the right hand side of an account.

    In the case of Michael Barry, the accounting equation;

    Assets=liabilities+stockholders equity

    Assets=$126,000

    Liabilities=$74,000

    Stockholders equity=$52,000

    liabilities+stockholders equity=74,000+52,000=$126,000

    The assets equals the sum of the liabilities and stockholders equity.

    To record expenses paid of $33,000;

    Debit Credit

    Expenses $33,000

    Cash $33,000
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