Chapter 1, Problem 1PSA

(a)

To determine

Transaction: It is an agreement between two or more parties for exchanging the goods or providing the services. The transactions which can be identified in terms of money are to be recorded in financial books.

Accounting Equation: It is an equation that represents the sum total of assets which is equal to the sum of liabilities and shareholder’s equity of the entity. The accounting equation is represented by the equation as shown below.

$\text{Total}\text{assets}=\text{Total}\text{liabilities}+\text{Owner's}\text{equity}$

To Prepare: Tabular analysis of the transactions occurred during the month of April.

(b)

To determine

Net income: It is the income earned by the organization after deducting all expenses from revenue earned. Net income is further divided into dividends and retained earnings. A portion of net income distributed to the stockholders is the dividends and some portion of net income has been transferred to retained earnings.

To prepare: The statement of income of Company S for the month of April.