Accounting Equation Examples: Analyzing Business Transactions

School: CDI College of Business, Technology and Health Care - Course: SUPPLY CHAIN MANAGEM MISC - Subject: Accounting

Class Exercises 1 S1-2 External User: Banker is outsider of the organization which means they can only use accounting information. Balance sheetwould help the bank to decide if the organization could deal with its future commitments. E1-7 Indicate the effects of the following business transactions on the accounting equation of a proprietorship. Transactiona is answered as a guide. a.Received $50,000 cash from the owner. Answer: Increase asset (Cash) Increase owner's equity (Owner, Capital) b.Paid the current month's office rent of $4,000. increase Expense (Rent Expense) Decrease Assets (Cash) c.Paid $3,500 cash to purchase office supplies. Increase Assets (Office Supplies) Decrease Assets (Cash) d.Performed engineering services for a client on account, $6,000. Increase Assets (Accounts Receivable) Increase Revenue (Service Revenue) e.Purchased office furniture on account at a cost of $5,000. Increase Assets (Furniture) Increase Liabilities (Account Payable) f.Received cash on account, $3,000. Increase Assets (Cash) Decrease Assets (Accounts Receivable) g.Paid cash on account, $2,500. Decrease Liability (Accounts Payable) Decrease Assets (Cash) h.Sold land for $50,000 cash, which was the business's cost of the land. Decrease Assets (Land) Increase Assets (Cash) i.Performed engineering services for a client and received cash of $6,000. Increase Assets (Cash) Increase Revenue (Service Revenue)
P1-2A Jon Conlin, CPA, was an accountant and partner in a large firm. Recently, he resigned his position to open his own accounting business, which he operates as a proprietorship. The following events took place during the organizing phase of his new business and its first month of operations: Jul. 4 Conlin received $100,000 cash from his former partners in the firm from which he resigned. 5 Conlin invested $50,000 cash in his business. 5 The business paid office rent expense for the month of July, $3,000. 6 The business paid $1,000 cash for letterhead stationery for the office. 7 The business purchased office furniture on account for $7,000, promising to pay within six months. 10 Conlin sold 2,000 shares of Royal Bank stock, which he had owned for several years, receiving $25,000 cash from his stockbroker. 11 Conlin deposited the $25,000 cash from sale of the Royal Bank shares in his personal bank account. 12 A representative of a large construction company telephoned Conlin and told him of the company's intention to transfer its accounting work to Conlin's business. 29 The business performed an audit for a client and submitted the bill for services, $10,000. The business expected to collect from this client within two weeks. 31 Conlin withdrew $3,000 cash from the business. Required Classify each of the preceding events as one of the following (list each date, then choose a, b, or c):

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