Let's examine the transaction step-by-step:
### Transaction:
- The company purchases supplies on account for [tex]$1,700.
### Analysis:
1. Assets:
- When a company purchases supplies, it increases its assets (specifically, the supplies account) by $[/tex]1,700. This is because supplies are a type of asset.
2. Liabilities:
- Since the purchase is made "on account," it means the company has not paid cash immediately but has agreed to pay in the future. This creates a liability for the company. Therefore, liabilities increase by [tex]$1,700.
3. Stockholders' Equity:
- There is no immediate change in stockholders' equity as a direct result of this transaction. Stockholders' equity, which includes retained earnings and other equity accounts, is not affected by the purchase of supplies on account.
### Accounting Equation:
The basic accounting equation is:
\[ \text{Assets} = \text{Liabilities} + \text{Stockholders' Equity} \]
Based on our analysis:
- Increase in Assets = $[/tex]1,700
- Increase in Liabilities = [tex]$1,700
- Change in Stockholders' Equity = $[/tex]0 (no effect)
### Result:
Thus, the amount of increases and decreases in the accounting equation can be written as:
[tex]\[ \text{Assets} = 1,700 \][/tex]
[tex]\[ \text{Liabilities} = 1,700 \][/tex]
[tex]\[ \text{Stockholders' Equity} = 0 \][/tex]
So, the final representation of the accounting equation after the transaction would be:
[tex]\[
\begin{array}{l} \text{Assets} = \text{Liabilities} + \begin{tabular}{c} \text{Stockholders} \\ \text{Equity} \end{tabular} \\
\hline
1,700 = 1,700 + 0 \\
\hline
\end{array}
\][/tex]
