Question

Evaluate the effect of each transaction by constructing a balance sheet showing an assets side and liabilities and owner’s equity.

Transactions for September:

1- Purchased $1,240 of paints from Painting Paradise on credit.

2- The owner invested $10,000 of his own money in the business.

3- Harding Gordon District High School purchased $575 worth of supplies on credit.

4- Paid $800 of the account payable to Painting Paradise.

5- Purchased a computer (equipment) for $1,130 and paid cash.

6- Cash sales for the month amounted to $6,375.

7- Paid $5,000 cash for this month’s rent.

8- Sold $1,380 of art supplies to Main College on credit.

9- Harding Gordon District High School paid $1,500 of their A/R.

10-Bank service charges totaled to $425 which was paid out of the business bank account.

11- Borrowed $20,000 from the bank and placed it directly in the bank account.

Answer 1

• All working forms part of the answer
• Answer has been provided to make you understand through Accounting Equation in Balance Sheet.
  Assets = Liabilities + Equity after every transactions and in totality.
• Owner’s Equity has been decreased by expenses and increased by revenues.
• Working of transaction/ balance sheet after each transaction

Transactions	ASSETS					Liabilities		Owner's Equity
	Cash	Inventory	Supplies	Accounts receivables	Equipment	Accounts Payable	Loan
1		$         1,240.00				$ 1,240.00
2	$          10,000.00							$ 10,000.00
3			$      575.00			$     575.00
4	$              (800.00)					$   (800.00)
5	$          (1,130.00)				$ 1,130.00
6	$             6,375.00							$    6,375.00
7	$          (5,000.00)							$ (5,000.00)
8				$ 1,380.00				$    1,380.00
9	$          (1,500.00)			$ 1,500.00
10	$              (425.00)							$     (425.00)
11	$          20,000.00						$ 20,000.00
TOTAL	$          27,520.00	$         1,240.00	$      575.00	$ 2,880.00	$ 1,130.00	$ 1,015.00	$ 20,000.00	$ 12,330.00

• Final Balance Sheet

ASSETS
Current Assets:
Cash	$          27,520.00
Inventory	$             1,240.00
Supplies	$                575.00
Accounts receivables	$             2,880.00
Total Current Assets	$          32,215.00
Plant, Property & Equipment	$             1,130.00
TOTAL ASSETS	$          33,345.00
LIABILITIES
Accounts payable	$             1,015.00
Loans	$          20,000.00
Total LIABILITIES	$          21,015.00
Owners' Equity total	$          12,330.00
Total LIABILITIES & OWNERs EQUITY	$          33,345.00