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Yes, a Business can enter into a transaction that affects only the left side of the basic accounting equation.
Can a business really enter into such a transaction? Explain with an Example.
Yes, a company can engage in a transaction that only affects the left side of the accounting equation. A transaction where a rise in one asset is balanced by a fall in another asset serves as an illustration. One particular example is an increase in the equipment account that is balanced out by a drop in the cash account.
What is on the left side of the Balance Sheet and in the accounting equation?
The items that your practice possesses and have a monetary worth are its assets. Your assets consist of tangible goods like cash, stock, and privately held real estate and equipment, as well as marketable securities (investments), pre-paid costs, and money owing to you (accounts receivable) from payers. Intangibles with value like registered patents or trademarks are also considered assets.
Assets are categorized on a balance sheet according to how rapidly they are anticipated to be sold, used up, or converted into cash. Fixed assets, such as buildings and equipment, are listed after current assets, such as cash, accounts receivable, and short-term investments, on the left side and are then summed. They are found on the left side of the Balance sheet.
Therefore, Yes a business enters into a transaction that affects only the left side of the basic accounting equation.
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