What Two Accounts Are Affected When A Business Pays Cash For A Cell Phone Bill
What 2 Accounts Are Affected When A Business Pays Cash For A Cell Phone Bill
Example: Mr. A is a sole proprietor pays cash of Rs. 3000 for a cell phone bill. What is the journal entry and the effect of this transaction on the accounting equation?
Paid Cash For Cell Phone Bill Journal Entry
The journal entry to record for paying cash for cell phone bill is shown below:
Communication Expense a/c 3000
Cash a/c 3000
(Communication Expense Paid For Cash)
The Effect Of Cash Paid For Cell Phone Bill On The Accounting Equation / The Effect Of Communication Expense Paid For Cash Or Bank On Accounting Equation
Assets = Liabilities + Owner’s Equity
-Cash = 0 + (-Communication Expense)
-3000 = 0 + (-3000)
The cash account is decreased by Rs. 3000 as it is going out of the business so it is deducted from assets on the assets side of the accounting equation. Communication expense is the result of profitable or operational activities of the owner of the business and as it is incurred by the business, which may increase revenue later on, so it decreases owner’s equity account on the right side of the accounting equation. With the effect of this transaction, the accounting equation is remained in balance at Rs. -3000 on the left side and Rs. -3000 on the right side of the accounting equation.
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