Question

Land originally purchased for $28,390 is sold for $74,057 in cash. What is the effect of the sale on the accounting equation

Answer 1

There is no effect on the accounting equation.

What is accounting equation?

Accounting equation is the one which states that a company's total assets are equal to the sum of its liabilities and its shareholders' equity.

Assets = owner's equity + liability

The above means that land is not depreciated, therefore assets decrease (-land) but also increase (+cash).

The elements of accounting equation are :

• Assets
• Liabilities
• Shareholders' equity.

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