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Squid Roe, Inc., purchased equipment that cost $20,000 by issuing a 6%, $15,000 promissory note and paying the remainder in cash. The effects on the accounting equation are ______.

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The effects on the accounting equation are:

  • Equipment, an asset, is increased by $20,000
  • Cash, an asset, is decreased by $5,000
  • Note Payable, a liability is increased by $15,000

Effect on accounting equation

Since the equipment cost $20,000 and the promissory note is $15,000. The effect on the accounting equation will  be:

Asset which is Equipment will  increased by $20,000, Cash an asset swill decreased by $5,000 ($20,000-$15,000) while Note Payable a liability is increased by $15,000.

Therefore the effects on the accounting equation is: Equipment, an asset, is increased by $20,000.

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