Question

Alex is a furniture designer. In September 2017, she decided to start her own business (Alex Furniture). Below is the summary of transactions that occurred during the first month of operations. On the basis of this information construct a balance sheet as of September 30th, 2017. 1. Sept 1st: Alex invested 100 000€ cash in the company. 2. Sept 2nd: Alex bought a new machine to be used in the business for 3 years. The machine cost 12000€, she paid 6000€ in cash and 6000€ was put on credit to be paid on September 30th (!). 3. Sept 3rd: Alex purchased material for building 5 tables, each set of material cost her 100€. She paid in cash. 4. Sept 20th: Alex sold her first table to a customer for 1000€. The customer paid in cash. By the end of the month the machine depreciated by 1000€. By September 30th Alex had 350€ worth of inventories in her warehouse. The rent for the office in September was 500€. She would pay the rent to the landlord in October 2017. a. Record these transactions in the accounting equation. Identify each transaction by the date when it was recorded.

Answer 1

     
Accounting Equation:

Asset = Equity(Capital) + Liabilities

Year-2017   Assets Liabilities Amount(in €)

Date	Particulars	Cash	Stock	Debtor	Machinery	Total	Liabilities	Capital	Total
Sep1	Cash Invested	100,000				100,000		100,000	100,000
Sep2	Machinery bought part in cash, part in credit	(6,000)			12,000	6,000	6,000		6,000
Sep3	Purchased material(100*5)	(500)	500			-
Sep20	Sold table in cash	1000	(100)			900		900	900
Sep30	Machinery depreciated				(1000)	(1000)		(1000)	(1000)
Sep30	Rent Outstanding						500	(500)	-
Sep30	Paid to Creditors for machinery purchased	(6000)				(6000)	(6000)		(6000)
Sep30	Adjustment to Closing stock		(50)			(50)		(50)	(50)
Total		88,500	350		11,000	99850	500	99,350	99,850

  Balance Sheet of Alexa as on 30th September 2017

Capital & Liabilities	Amount(in €)	Assets	Amount(in €)
Capital(Equity)	99350	Machinery	11000
Outstanding Rent	500	Cash	88500
		Stock	350
Total	99850	Total	99850