A contractor records a $50,000 equipment purchase. On the balance sheet this transaction:
Explanation
Paying cash for equipment exchanges one asset for another, so cash falls and equipment rises by the same amount and total assets do not move; the cost reaches the income statement later, through depreciation. It is not profit, because nothing has been earned. It is not revenue, because nothing has been sold. And equity is untouched: equity changes when the business earns, loses, or when the owner contributes or withdraws, not when it converts one asset into another.
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