Question

Joshua Ford paid $1,450 for the monthly office rent. This transaction affects the accounting equation by __________.

Answer 1

The transaction where Joshua Ford pays $1,450 for monthly office rent affects the accounting equation by decreasing assets (specifically cash) and increasing expenses. In terms of the accounting equation (Assets = Liabilities + Equity), the decrease in cash reduces assets, while the rent expense will ultimately reduce equity through retained earnings.

So, the accounting equation is affected as follows:

1. **Assets** decrease by $1,450 (cash).
2. **Liabilities** remain unchanged.
3. **Equity** decreases by $1,450 due to the increase in expenses.

In summary, the transaction affects the accounting equation by decreasing assets and decreasing equity.