Spotune is a digital music service that gives you access to millions of songs.It provides $3,850 including GST for music customers. Cash of $1,500 was received from the customers and a balance of $2,350 is invoiced on account. Identify the impact in the accounting equationYou Answered

The accounting equation is Assets = Liabilities + Equity. Here's how the transaction impacts the equation:

1. When Spotune receives $1,500 in cash from customers, its cash (an asset) increases by$1,500. So, the equation becomes: (Assets + $1,500) = Liabilities + Equity.

2. When Spotune invoices $2,350 on account, it's essentially providing a service now and expecting to receive payment later. This is known as Accounts Receivable, which is also an asset. So, the equation becomes: (Assets +$1,500 + $2,350) = Liabilities + Equity.

3. The total revenue from the music customers is $3,850, which increases Spotune's equity (specifically, its retained earnings). So, the equation becomes: (Assets +$1,500 + $2,350) = Liabilities + (Equity +$3,850).

4. However, the $3,850 revenue includes GST. If we assume the GST rate is 10$350 ($3,850 / 1.1 =$3,500 for the service, and $3,850 -$3,500 = $350 for GST). This$350 is a liability (specifically, a tax payable) because Spotune needs to remit it to the government. So, the equation becomes: (Assets + $1,500 +$2,350) = (Liabilities + $350) + (Equity +$3,500).

So, the final impact on the accounting equation is: Assets increase by $3,850, Liabilities increase by$350, and Equity increases by $3,500.