Answer & Explanation:
Transactions Effect on Cash
1. Purchase of goods for resale decreases on purchases
When goods are purchased cash is decreased unless they are sold.
2. Issue of common shares Increases
On Issuing shares money is collected so it increases cash.
3. Sale of equipment that the company has finished using increases
Sale of equipment increases cash.
4. Receipt of bank loan Increases
Bank Loan increases the current cash as more cash is added.
5. Purchase of long-term investment decreases on purchases
Long term investment decrease cash unless they are sold for a profit
6. Purchase of equipment decreases on purchases
Purchase of equipment decreases cash
7. Sale of merchandise to customers Increases
Sales increase the cash if credit sales are not considered
8. Payment of salaries to employees decreases
Payment of salaries to employees decreases cash
9. Sale of long-term investment Increases
Sale of long-term investment Increases as it yields profit.
10. Repayment of loan owed to bank decreases
Repayment of loan owed to bank decreases as cash is paid to the bank.
11. Payment of dividends decreases
Payment of dividends decreases cash as they are the repayments of the share holder's capitals .
12. Payment of interest on money borrowed from bank decreases
Payment of interest on money borrowed from bank decreases as cash is deposited in the bank for the interest accrued.
All payments and purchases ( other than credit ) decrease cash. All receipts and sales ( other than credit ) increase cash.
These transactions effects are only on the current cash account. They do not predict future profits or losses.
