COMPREHENSIVE ILLUSTRATION -- TRANSACTION IMPACT ON FINANCIAL STATEMENTS

Transaction #4:  Received bill for utility costs incurred

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This illustration shows how utilities expense is increased by $1,000 based upon a bill received for electricity used.  Because the bill has not yet been paid, it results in an increase in accounts payable to show that amounts are due.  The transaction causes liabilities to increase and equity to decrease by $1,000, leaving the balance sheet in balance.  The decrease in equity is triggered by a decrease in income, and therefore a decrease in retained earnings.