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Chapter 3

Example 1: Solution (cont.)

Day 3 Obtained a $1,000 loan.

Assets (cash) increases by
Liabilities (loan) increases by

AVO’s accounting equation becomes:

Assets = Equity + Liabilities

Day 4 Purchased goods for $300 cash.

Equity (profit) decreases by

Assets (cash) decreases by
AVO’s accounting equation becomes:

Assets = Equity + Liabilities

Day 5 Sold goods for $400 on credit.

Equity (profit) increases by
Assets (receivables) increases by

AVO’s accounting equation becomes:

Assets = Equity + Liabilities

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