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PDtax, Master's Degree
Category: Business and Finance Homework
Satisfied Customers: 4027
Experience:  MBA/CPA, Former college instructor and tutor.
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Construct an example of a transaction between two parties.

Customer Question

Construct an example of a transaction between two parties. Identify what accounts are affected and how changes in those accounts impact the accounting equation. Explain the purpose for recording the transaction on the company’s books.
Contentiously, I need this answered by today. Will provide a bonus.
Submitted: 3 years ago.
Category: Business and Finance Homework
Expert:  PDtax replied 3 years ago.
Welcome to the site. I'm PDtax, and will be helping you today.
Is there anything specific to add in background on your question? Otherwise, I can answer it later this morning.
Expert:  PDtax replied 3 years ago.
Let's use a simple example of a sale of goods for cash by A to Customer B. Both companies have just started in business.
Store A
Cash = $500
Inventory = $400
Stock $900
Assets (900) = equity (900)
Customer B
Cash $1,100
Stock $1,100
Assets (1100) = Equity (1100)
B purchases goods from A for $600. Their cost to A was $300.
After the sale, A:
Cash (1100) + inventory (100) = equity (900 + 300 income)
After the sale, B:
Cash (500) + inventory (600) = equity (1100)
The accounting equation stays in balance for both enterprises.
Please advise if this answers your question, or if you need anything more. I'm PDtax.
Customer: replied 3 years ago.

Excellent Service. Thanks!!

Expert:  PDtax replied 3 years ago.

You're welcome.PDtax