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 paint 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. 1

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

Answer 1

Solution :

Transaction	Assets		=	Liability		+	Owners’ Equity
1.	Inventory	+ $ 1,240	=	Accounts Payable	+ $ 1,240	+	NA	NA
2.	Cash	+ $ 10,000	=	NA	NA	+	Capital invested	+ $ 10,000
3.	Supplies Accounts Receivable	- $ 575 + $ 575	=	NA	NA	+	NA	NA
4.	Cash	-$ 800	=	Accounts Payable	-$ 800	+	NA	NA
5.	Computer (Equipment) Cash	+$ 1,130 -$ 1,130	=	NA	NA	+	NA	NA
6.	Cash	+$ 6,375	=	NA	NA	+	Sales Revenue	+$ 6,375
7.	Cash	-$ 5,000	=	NA	NA	+	Rent Expense	- $ 5,000
8.	Art supplies Accounts Receivable	-$ 1,380 +$ 1,380	=	NA	NA	+	NA	NA
9.	Cash Accounts Receivable	+$ 1,500 -$ 1,500	=	NA	NA	+	NA	NA
10.	Bank	-$ 425	=	NA	NA	+	Bank charges expense	-$ 425
11.	Bank	+$ 20,000	=	Bank loan or borrowings	+$ 20,000	+	NA	NA
Total	$ 31,390		=	$ 20,440		+	$ 10,950