Question

7-23. The Costello Tax Services business was established on 1 March of the current year to help clients with their tax planning. During January, the business entered into the following transactions:

Date	Transactions
2 March	Mr Swan set up the business by investing $10,000 in the business cheque account.
3	The business paid $5280 (including GST) in advance for one year's rent of office space.
4	Office equipment was purchased at a cost of $13200 (including GST). A down payment of $2200 was made, and an $11000 note payable was signed for the balance owed. The note is due in one year.
7	Office supplies were purchased for $1760 cash (including GST)
16	Fees of $3740 (including GST) were collected from clients for tax services provided during the first half of March.
29	A salary of $2000, which included $300 PAYG tax, was paid to the office secretary.
30	Mr Swan withdrew $1800 for personal use.
31	The March electricity bill of $264 (including GST) was received; iit will be paid in early April.
31	Clients were billed $5060 including GST for tax services performed during the second half of March.
31	Swan recorded the following adjustments: a. Rent expense for the month b. Depreciation of $90 on office equipment. c. Interest expense of $110 on the note payable. d. Office supplies used (the office supplies on hand at the end of the month cost $1440).

Required:

a. Using the following column headings or account titles, prepare a worksheet to record the above transactions: Date, Cash, Prepaid Rent, Office Equipment, Office Supplies, Accounts Receivable, GST Paid, Notes Payable, Electricity Payable, GST Collected, PAYG Payable, Capital, Tax Service Revenue, Salary Expense, Electricity Expense, Rent Expense, Depreciation, Internet Expense, Office Supplies Expense.

b. Prepare a trial balance.

c. Prepare a classified income statement for the business for March.

d. Prepare a balance sheet for the business on 31 March.

e. Briefly comment on how well the business did during March.

Answer 1

	Date	Account Titles	Debit	Credit
	March	2	Cash	$10,000
			Capital		$10,000
		3	Prepaid Rent	$5,280
			Cash		$5,280
		4	Office Equipment	$13,200
			Notes Payable		$11,000
			Cash		$2,200
		7	Office Supplies	$1,760
			Cash		$1,760
		16	Cash	$3,740
			Tax Service Revenue		$3,740
		29	Salary Expense	$2,000
			Cash		$1,700
			PayG payable		$300
		30	Capital	$1,800
			Cash		$1,800
		31	Electricity Expense	$264
			Electricity Payable		$264
		31	Accounts Receivable	$5,060
			Tax Service Revenue		$5,060
	a.	31	Rent Expense	$440		(5280/12)
			Prepaid Rent		$440
	b	31	Depreciation expense	$90
			Office Equipment		$90
	c	31	Interest expense	$110
			Interest Payable		$110
	d	31	Office Supplies Expense	$320		(1760-1440)
			Office Supplies		$320
			CASH
	Date	Description	Debit	Credit	Balance
	March	2	Capital	$10,000		$10,000
		3	Prepaid Rent		$5,280	$4,720
		4	Office Equipment		$2,200	$2,520
		7	Office Supplies		$1,760	$760
		16	Tax Service revenue	$3,740		$4,500
		29	Salary Expenses		$1,700	$2,800
		30	Cash		$1,800	$1,000