Chapter 3, Problem 2CTP

To determine

Identify the financial condition of Company BSA during the month of January.

Explanation of Solution

T-account:

T-account refers to the individual account, which records the increases or decreases in the value of assets, liability, owner's equity, revenue, and expenditure items.

This account is named as the T-account, as the alignment of the components of the account generally resembles the capital letter ‘T’.’ It consists of the three main components, as follows:

(a)    The title of the account

(b)   The left or debit side

(c)    The right or credit side

Transaction	Account
1	Cash
	(a)	+ 20,000	(b)	- 2,000
	(d)	+ 4,550	(c)	- 2300
	(i)	+ 2,130	(e)	- 0,210
	(m)	+ 2,300	(g)	- 75
	(p)	900	(h)	- 0,550
			(k)	- 4,000
			(l)	- 0,225
			(n)	- 0,460
			(q)	- 2,500
			(r)	- 0,600
	Bal.	+ 16,960
2	Accounts Receivable
	(f)	+ 1,560	(i)	- 2130
	(0)	+ 2,150	(p)	- 900
	Bal.	+ 680
3	Office Equipment
	(g)	+ 325
	Bal.	+ 325
4	Office Furniture
	(c)	+ 2,300
	(j)	+ 545
	Bal.	+ 2845
5	Accounts Payable
	(l)	+ 225	(g)	- 250
			(j)	- 545
			Bal.	- 570
6	Advertising Expense
	(b)	+ 2,000
	Bal.	+ 2,000
7	BS, Capital
			(a)	- 20,000
			Bal.	- 20000
8	BS, Drawing
	(q)	+ 2,500
	Bal.	+ 2,500
9	Utilities Expense
	(n)	+ 460
	Bal.	+ 460
10	Salaries Expense
	(k)	+ 4000
	Bal.	+ 4,000
11	Fees Income
			(d)	- 4550
			(f)	- 1560
			(m)	- 2300
			(o)	- 2,150
			Bal.	- 10560
12	Telephone Expense
	(e)	+ 210
	Bal.	+ 210
13	Miscellaneous Expense
	(h)	+ 550
	(r)	+ 600
	Bal.	+ 1,150

Table (1)

Trial balance: Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Financial statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making.

Income statement: Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.

Statement of owner's’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.

Balance Sheet: Balance Sheet summarizes the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the Trial Balance of Company BSA:

Company BSA
Trial Balance
Month Ended January 31, 2019
Account Name	Debit	Credit
Cash	$ 16,960
Accounts Receivable	$ 680
Office Furniture	$ 2,845
Office Equipment	$ 325
Accounts Payable		$ 570
BS, Capital		$ 20,000
BS, Drawing	$ 2,500
Fees Income		$ 10,560
Advertising Expenses	$ 2,000
Utilities Expense	$ 460
Salaries Expense	$ 4,000
Telephone Expense	$ 210
Miscellaneous Expenses	$ 1,150
Total	$ 31,130	$ 31,130

Table (2)

Prepare the Income Statement of Company BSA:

Company BSA
Income Statement
Month Ended January 31, 2019
Particulars	Amount ($)	Amount ($)
Revenues
Fees Income		$ 10,560
Expenses
Advertising Expenses	$ 2,000
Utilities Expense	$ 460
Salaries Expense	$ 4,000
Telephone Expense	$ 210
Miscellaneous Expenses	$ 1,150
Total expenses		$ 7,820
Net income		$ 2,740

Table (3)

Prepare the Statement of Owner's equity of Company BSA:

Company BSA
Statement of Owner's Equity
Month Ended January 31, 2019
Particulars	Amount ($)	Amount ($)
BS Capital, January 1, 2019		$ 20,000
Net income for January	$ 2,740
Deduct - Withdrawals	$ 2,500
Increase in Capital		$ 240
BS Capital, January 31, 2019		$ 20,240

Table (4)

Prepare the Balance Sheet of Company BSA:

Company BSA
Balance sheet
As on January 31, 2019
Particulars	Amount	Particulars	Amount
Assets		Liabilities
Cash	$ 16,960	Accounts payable	$ 570
Accounts Receivable	$ 680	Owner's equity
Office Equipment	$ 325	CM Capital	$ 20,240
Office furniture	$ 2,845
Total assets	$ 20,810	Total liabilities and owner's equity	$ 20,810

Table (5)

The total assets of Company BSA equals the total liabilities of $20,810.