Concept explainers
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)
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.
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Chapter 3 Solutions
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