Question: Quality Service Inc. has the following accounts balances in their charts of accounts balances as at June 1, 2020: Cash $138,000; Accounts receivable $0; Land $ 30,000; Building $0; Supplies $0; Accounts payable $0; Notes payable $0; Quality-capital $70,000; Service revenue $98,000; Utilities, salary expense $0. The company also presented the following transactions for the month: June 1. Purchased supplies for $1000 on account June 4. Purchased a building for, $62,100 cash June 6. Performed service for a client on account, $12,000 June 6. Borrowed $7,000 cash, signing a note payable June 13. Paid the liability from June 1 June 17. Sold for $15,000 land that had cost this same amount June 21. Received $8000 cash from June 10 transaction June 30. Paid utilities expense of $600 and salary expense $2,500 Requirements: State the effect each transaction from June 1st -30th will have on the accounting equation. For example, the transaction increased asset and increased capital; the transaction increased expenses and decreased cash; the transaction increased asset and decreased asset; etc. Prepare the journal entries with narrations to record the transactions for “June” Post the transactions recorded in your journal to their respective “T” accounts and balance off each account at June 30th, 2020. Having determined the account balances, represent this information using the expanded accounting equation.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Question:
Quality Service Inc. has the following accounts balances in their charts of accounts balances as at June 1, 2020:
Cash $138,000;
The company also presented the following transactions for the month:
June 1. Purchased supplies for $1000 on account
June 4. Purchased a building for, $62,100 cash
June 6. Performed service for a client on account, $12,000
June 6. Borrowed $7,000 cash, signing a note payable
June 13. Paid the liability from June 1
June 17. Sold for $15,000 land that had cost this same amount
June 21. Received $8000 cash from June 10 transaction
June 30. Paid utilities expense of $600 and salary expense $2,500
Requirements:
- State the effect each transaction from June 1st -30th will have on the
accounting equation. For example, the transaction increased asset and increased capital; the transaction increased expenses and decreased cash; the transaction increased asset and decreased asset; etc. - Prepare the
journal entries with narrations to record thetransactions for “June” - Post the transactions recorded in your journal to their respective “T” accounts and balance off each account at June 30th, 2020.
- Having determined the account balances, represent this information using the
expanded accounting equation .
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