Chapter 1, Problem 1SP

To determine

Assets means current asset as well as non-current asset that comprises of cash, properties or anything owned by the company which will generate future benefit.

Liabilities means any amount owed to the creditors of the business

Equity means the investment done in the business.

As per accounting equation, total of asset should be equal to the sum of liabilities and equity.

To determine:

We have to determine the changes of the transactions within the table

Solution:

	ASSET($)							=	LIABILITIES($)	+	EQUITY($)
Date	Cash +	Accounts receivable+	Computer supplies+	Computer system+	Office equipment+	=	Accounts payable	+	Common stock	-	withdrawal	+	Revenues	-	expenses
Oct 1	45000			20000	8000	=		+	73000	-		+		-
Oct 3			1420			=	1420	+		-		+		-
Bal	45000		1420	20000	8000	=	1420	+	73000	-		+		-
Oct6		4800				=		+		-		+	4800	-
Bal	45000	4800	1420	20000	8000	=	1420	+	73000	-		+	4800	-
Oct8	(1420)					=	(1420)	+		-		+		-
Bal	43580	4800	1420	20000	8000	=	0	+	73000	-		+	4800	-
Oct10						=		+		-		+		-
Bal	43580	4800	1420	20000	8000	=	0	+	73000	-		+	4800	-
Oct12	N	1400				=		+		-		+	1400	-
Bal	43580	6200	1420	20000	8000	=	0	+	73000	-		+	6200	-
Oct15	4800	(4800)				=		+		-		+		-
Bal	48380	1400	1420	20000	8000	=	0	+	73000	-		+	6200	-
Oct 17	(805)					=		+		-		+		-	805
Bal	47575	1400	1420	20000	8000	=	0	+	73000	-		+	6200	-	805
Oct20	(1728)					=		+		-		+		-	1728
Bal	45847	1400	1420	20000	8000	=	0	+	73000	-		+	6200	-	2533
Oct22	1400	(1400)				=		+		-		+		-
Bal	47247	0	1420	20000	8000	=	0	+	73000	-		+	6200	-	2533
Oct28		5208				=		+		-		+	5208	-
Bal	47247	5208	1420	20000	8000	=	0	+	73000	-		+	11408	-	2533
Oct31	(875)					=		+		-		+		-	875
bal	46372	5208	1420	20000	8000	=	0	+	73000	-		+	11408	-	3408
Oct31	(3600)					=		+		-	3600	+		-
Bal	42772	5208	1420	20000	8000	=	0	+	73000	-	3600	+	11408	-	3408

Explanation of Solution

Explanation:

October 1- The effect of each transaction is shown in the above table. Cash invested, computer system and office equipment bought will increase the assets and the same will be treated in common equity as this will be considered as capital.

October 6- since company billed easy learning for services performed therefore accounts receivable will be increased by the $4800 and so as the revenue with the same amount.

October 8- Since company pays $1420 for computer supplies purchased, therefore cash and accounts payable will decrease with the same amount

October 12- Since company booked $1400 for services performed therefore accounts receivable and revenue will increase.

October 15- since cash is received for partial payment towards easy leasing account therefore cash will increase and accounts payable will decrease with the amount of $4800.

October 17- when cash is paid for repairing then cash will decrease with the $805 as cash will be paid and expenses will increase with the same amount.

October 20 − since company pays for advertisement , then cash will decrease and expenses of the company will increase .

October 22- company receives cash against easy leasing account ,therefore cash will increase and accounts receivable account will decrease with the amount $1400.

October 28- since company billed $5208 for service performed, therefore accounts payable and revenue will increase with the same amount.

October 31- since company pays wages therefore cash will decrease with the amount $875 and the expenses will increase with the same amount.

October 31- since company withdraws $3600 cash for personal use therefore cash will get reduced with the amount of $3600 and amount of withdrawal will be $3600.

And according to accounting equation total of assets is equal to the amount of equity and the liabilities.