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Concept introduction:
Account Payables: For delivered goods or services, the cash owed by the business that they are required to pay to their suppliers is called the account payables. In the balances sheet, the account payables are shown as liabilities.
Account Receivables: For delivered goods or services, the cash owed by the customer that they need to pay to the business is called account payables. In the balances sheet, the account payables are shown as assets.
Asset: A resource which will generate a
Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is known as liability. Liabilities such as mortgages, accounts payables, accrued expenses and loans are recorded on the right hand side of the balance sheet.
Equity: Equity is the value of an asset less the amount of all liabilities on that asset. It can be represented with the
Income Statement: The statement in which the
1. To write: The statement showing addition and subtraction of each transaction for the month of May.
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Explanation of Solution
Assets =Liabilities + Equity | ||||||||
Date | Cash | Office Equipment | Accounts payable | G.Gram Capital | G.Gram Withdrawals | Revenues | Expenses | |
May 1 | $40,000 | $40,000 | ||||||
May 1 | ($2,200) | $2,200 | ||||||
May 3 | $1,890 | $1,890 | ||||||
May 5 | ($750) | $750 | ||||||
May 8 | $5,400 | $5,400 | ||||||
May 12 | $2,500 | $2,500 | ||||||
May 15 | ($750) | $750 | ||||||
May 20 | $2,500 | ($2,500) | ||||||
May 22 | $3,200 | $3,200 | ||||||
May 25 | $3,200 | ($3,200) | ||||||
May 26 | ($1,890) | ($1,890) | ||||||
May 27 | $80 | $80 | ||||||
May 28 | ($750) | $750 | ||||||
May 30 | ($300) | $300 | ||||||
May 30 | ($280) | $280 | ||||||
May 31 | ($1,400) | $1,400 | ||||||
Total | $42,780 | $0 | $1,890 | $80 | $40,000 | $1,400 | $11,100 | $5,110 |
2. To write: The income statement for the month of May
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Explanation of Solution
Particulars | Amount | |
Revenue | $11,100 | |
Total Revenues (A) | $11,100 | |
Salaries expense | $1,500 | |
Telephone expense | $300 | |
Rental expense | $2,200 | |
Selling and administrative expense | $1,110 | |
Total Expense (B) | $5,110 | |
Net Income (A-B) | $5,990 | |
Owners Equity account for the month of May
Particulars | Amount | Amount |
Owners Capital | ||
Opening Capital | $0 | |
Add: Invested during the year | $40,000 | |
Add: Profit during the year | $5,990 | |
$45,990 | ||
Less: A. Armani Withdrawals | $1,400 | $44,590 |
Balance Sheet for the month of May
Particulars | Amount | Amount |
Owners Capital | 44,590 | |
Current Liabilities | ||
Accounts Payable | $80 | |
Total | $44,670 | |
Fixed Assets | ||
Equipment | $1,890 | |
Current Assets | ||
Accounts Receivable | $0 | |
Cash | $42,780 | |
Total | $44,670 |
3. To write: The cash flow for the month of May
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Explanation of Solution
Particulars | Amount | Amount |
Cash from operating activities | $6,070 | |
Cash used by investing activities | ($1,890) | |
Cash from financing activities | ||
Capital Introduced | $40,000 | |
Amount withdrawn | $1,400 | $38,600 |
Net Increase/(decrease) in cash | $42,780 | |
Add: Opening Cash Balance as on Dec.31, 2016 | $0 | |
Closing Cash Balance as on Dec.31, 2017 | $42,780 |
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Chapter 1 Solutions
Loose Leaf for Fundamental Accounting Principles
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