Question

Darby consulting was established on 1 March and during March Darby entered into the following transactions:

1 Issued $10000 shares in exchange for cash

3 Purchased $300 of supplies on account

7 Prepaid $1500 rent for April, May and June

8 Paid $175 towards 3 March purchase of supplies

11 Billed customers $5780 for services rendered

12 Paid $700 for March advertising

25 Received $4500 from customers billed on March 11

28 Paid $200 in dividends to shareholders

29 Paid $1200 in March salaries

29 Paid $760 for water usage

a) prepare a journal entry for the transactions

b) Post the journal to the appropriate ledger (t-accounts)

c) Prepare a trial balance at 31 March

d) Prepare an income statement and statement of retained earnings for the month of March.

Answer 1

SOLUTION

A. Journal Entries

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
March 1	Cash	10,000
	Common Stock		10,000
March 3	Office Supplies	300
	Accounts Payable		300
March 7	Prepaid Rent	1,500
	Cash		1,500
March 8	Accounts Payable	175
	Cash		175
March 11	Accounts Receivable	5,780
	Service Revenue		5,780
March 12	Advertising Expense	700
	Cash		700
March 25	Cash	4,500
	Accounts Receivable		4,500
March 28	Dividends	200
	Cash		200
March 29	Salaries Expense	1,200
	Cash		1,200
March 29	Utilities Expense	760
	Cash		760

B. T-Accounts

Cash A/c

Particulars	Amount ($)	Particulars	Amount ($)
Common stock	10,000	Prepaid Rent	1,500
Accounts Receivable	4,500	Accounts Payable	175
		Advertising Expense	700
		Dividends	200
		Salaries Expense	1,200
		Utilities Expense	760
Balance	9,965

Accounts Receivable A/c

Particulars	Amount ($)	Particulars	Amount ($)
Service Revenue	5,780	Cash	4,500
Balance	1,280

Office Supplies A/c

Particulars	Amount ($)	Particulars	Amount ($)
Accounts Payable	300
Balance	300

Salaries Expense A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	1,200
Balance	1,200

Dividends A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	200
Balance	200

Advertising expenses A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	700
Balance	700

Utilities Expense A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	760
Balance	760

Service revenue A/c

Particulars	Amount ($)	Particulars	Amount ($)
		Accounts receivable	5,780
		Balance	5,780

Accounts payable A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	175	Office supplies	300
		Balance	125

Common stock A/c

Particulars	Amount ($)	Particulars	Amount ($)
		Cash	10,000
		Balance	10,000

Prepaid Rent A/c

Particulars	Amount ($)	Particulars	Amount ($)
Cash	1,500
Balance	1,500

C. Trial balance-

	Debit ($)	Credit ($)
Cash	9,965
Accounts Receivable	1,280
Office Supplies	300
Prepaid Rent	1,500
Accounts Payable		125
Common stock		10,000
Service Revenue		5,780
Advertising Expense	700
Salaries Expense	1,200
Utilities Expense	760
Dividends	200
Totals	15,905	15,905

D. Income statment-

	Amount ($)	Amount ($)
Service revenue		5,780
Expenses:
Advertising expense	700
Salaries expense	1,200
Utilities expense	760
Total expenses		2,660
Net income		3,120

Statement of retained earnings-

	Amount ($)
Retained earnings, March 1	0
Add: Net Income	3,120
Less: Dividends	200
Retained earnings, March 31	2,920