The accounting equation is often described as being very important in accounting. Explain the purpose of the accounting equation and state two different forms or ways in which it can be written.
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UWI Open Campus
ACCT 1002
INTRODUCTION TO
FINANCIAL ACCOUNTING
Worksheet 1
Unit # 2 Worksheet
Financial Accounting Cycle- Part I
1. The
accounting. Explain the purpose of the accounting equation and state two
different forms or ways in which it can be written.
2. Distinguish between assets and liabilities and provide three (3) examples of
each to support your arguments.
3. Distinguish between income and expenses and provide three (3) examples of
each to support your arguments.
4. Suppose a business receives a bill for services rendered from one of its
suppliers. The business will pay the supplier next month. When the business
receives the bill from its supplier, explain how this affect the accounting equation
in terms of increasing or decreasing assets, liabilities, or owner’s equity?
5. Suppose equipment is sold for cash in an amount equal to the cost of the
equipment recorded on the books. How does this sale affect the accounting
equation in term of increasing or decreasing assets, liabilities or owner’s equity?
6. At the end of December 2014, a business shows the following balances in its
general ledger. You are required to use this information to prepare the
company’s
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7. The following transactions relates to Edwards Co for the month of January 2013.
You are required to record the
journal, post them to the ledger accounts and then prepare the trial balance for the
company.
a. Edward Wilson invested $8,000 cash in his new landscaping business.
b. The business paid the first month's rent with $300 cash.
c. The business purchased equipment by paying $2,000 cash and
executing a note payable for $3,000.
d. The business purchased supplies for $200 cash.
e. The business billed clients for a total of $1,000 for design services
rendered.
f. The business received $750 cash from clients for services rendered
above.
g. The owner took a withdrawal of $2,000.
8. The following trial balance for Kids Play does not balance and the owner is
concerned and has passed it to you for review and adjustments where
applicable:
Trial Balance
June 30th, 2013
Account Debit Credit
Cash 6,600
Supplies 600
Motor vehicle 89,000
Accounts payable 55,000
Marlon Morgan: Capital 50,700
Marlon Brown: Withdrawal 2,300
Service revenue 4,500
Salary 4,100
Rent 800 .
111,400 110,200
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You have now been presented with the following list of errors and have been asked to
prepare the adjusted trial balance: (journal entries are not required)
a. Cash was understated by $2,000
b. A $1,000 debit to accounts receivable was posted as a credit.
c. A $1,400 purchase of supplies on account was omitted from the
company’s books.
d. Motor Vehicle cost should have been $84,300 instead of $89,000
e. Salary expense was overstated by $500
9. Maury Wills started an environmental consulting business & during the first
month of operations (June 2008) completed the following transactions:
a) Wills began the business with an investment of $25,000 cash and a building
valued at $30,000. The business gave Wills the owner’s equity in the firm.
b) Purchased office supplies on account, $2,100
c) Paid $18,000 for office furniture
d) Paid employee’s salary, $2,200
e) Performed consulting service on account, $5,100
f) Paid $800 on the account payable created in transaction (b)
g) Received a $600 bill for advertising expense that will be paid in the near
future
h) Performed consulting service for customers and received cash, $1,600
i) Received cash on account, $1,200
j) Paid the following cash expenses and made a single compound entry:
i) Rent on equipment, $700
ii) Utilities, $400
k) Withdrew $3,000 for personal use
Required:
1. Record each transaction in the journal. Use the letters to identify the
transactions.
2.
3. Prepare the trial balance of Wills Environmental Consulting at June 30, 2008
10.Record the following transactions in General Journal format. Include appropriate
narrations.
a. Paid advertising expenses, $1,260.
b. Provided services worth $500 to customers on account.
c. Purchased office equipment on account for $4,000.
d. Angie McDonald, the owner, withdrew $700 cash from the business.
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e. Received $250 from customers who were previously billed in (2) above.
f. Purchased land in exchange for $36,000 cash.
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