Question

Step 1 – Analyze Business Transactions (Accounting Cycle) Assume that you are the Financial Accountant of a newly started business from your chosen in August 2020: You are requested to assume the chosen business transactions during the month of August 2020 and analyze it by shown the impact of these transactions on the accounting equation!

Answer 1

Assumed transactions for the month of August 2020:

Aug1. Issued common shares for $100,000

2. Purchased building for cash $40,000

6. Performed services worth $10,000 and the amount was collected immediately

7. Purchased supplies for $10,000 on account from Delta enerprises

9. Paid $5,000 to Delta enterprises.

11. Billed $6,700 to Mr.Anderson for services performed, he was not able to pay immediately.

12. Salaries paid to staff $5,300

15. Commission received $15,000

22.Received full amount from Mr.Anderson

26. Paid insurance for building $2,000

31. Supplies on hand cost $3,000 at the end of the month, which means $7,000 was incurred as supplies expense for the month of august.

31. Maintenance services were received on account $8,800

IMPACT ON ACCOUNTING EQUATION

ASSETS = LIABILITIES + STOCK HOLDERS' EQUITY

	ASSETS	=	LIABILITIES	+	STOCK HOLDERS' EQUIYY
Date	Cash	+	Accounts receivable	+	Building	+	Supplies	=	Accounts payable	+	Common shares	+	Revenue	-	Salary expense	-	Insurance expense	-	Supplies expense	-	Maintenance expense
1.	100,000	+		+		+		=		+	100,000	+		-		-		-		-
2.	-40,000	+		+	40,000	+		=		+		+		-		-		-		-
Balance	60,000	+		+	40,000	+		=		+	100,000	+		-		-		-		-
6.	10,000	+		+		+		=		+		+	10,000	-		-		-		-
Balance	70,000	+		+	40,000	+		=		+	100,000	+	10,000	-		-		-		-
7.		+		+		+	10,000	=	10,000	+		+		-		-		-		-
Balance	70,000	+		+	40,000	+	10,000	=	10,000	+	100,000	+	10,000	-		-		-		-
9.	-5,000	+		+		+		=	-5,000	+		+		-		-		-		-
Balance	65,000	+		+	40,000	+	10,000	=	5,000	+	100,000	+	10,000	-		-		-		-
11.		+	6,700	+		+		=		+		+	6,700	-		-		-		-
Balance	65,000	+	6,700	+	40,000	+	10,000	=	5,000	+	100,000	+	16,700	-		-		-		-
12.	-5,300	+		+		+		=		+		+		-	5,300	-		-		-
Balance	59,700	+	6,700	+	40,000	+	10,000	=	5,000	+	100,000	+	16,700	-	5,300	-		-		-
15.	15,000	+		+		+		=		+		+	15,000	-		-		-		-
Balance	74,700	+	6,700	+	40,000	+	10,000	=	5,000	+	100,000	+	31,700	-	5,300	-		-		-
22.	6,700	+	-6,700	+		+		=		+		+		-		-		-		-
Balance	81,400	+		+	40,000	+	10,000	=	5,000	+	100,000	+	31,700	-	5,300	-		-		-
26.	-2,000	+		+		+		=		+		+		-		-	2,000	-		-
Balance	79,400	+		+	40,000	+	10,000	=	5,000	+	100,000	+	31,700	-	5,300	-	2,000	-		-
31.		+		+		+	-7,000	=		+		+		-		-		-	7,000
Balance	79,400	+		+	40,000	+	3,000	=	5,000	+	100,000	+	31,700	-	5,300	-	2,000	-	7,000
31.		+		+		+		=	8,800	+		+		-		-		-		-	8,800
Balance	79,400	+		+	40,000	+	3,000	=	13,800	+	100,000	+	31,700	-	5,300	-	2,000	-	7,000	-	8,800

Look at the balances after each transaction. It proves that, Assets = Liabilities + Stock holders' equity

See this table for better understanding

Date	Accounts involved	DR($)	CR($)	change(+ or -)
1	Cash	100,000		+
	Common shares		100,000	+
2	Building	40,000		+
	Cash		40,000	-
6	Cash	10,000		+
	Service revenue(revenue)		10,000	+
7	Supplies	10,000		+
	Accounts payable		10,000	+
9	Accounts payable	5,000		-
	Cash		5,000	-
11	Accounts receivable	6,700		+
	Service revenue(revenue)		6,700	+
12	Salary expense	5,300		+
	Cash		5,300	-
15	Cash	15,000		+
	Commission received(revenue)		15,000	+
22	Cash	6,700		+
	Accounts receivable		6,700	-
26	Insurance expense	2,000		+
	Cash		2,000	-
31	Supplies expense	7,000		+
	Supplies		7,000	-
31	Maintenance expense	8,800		+
	Cash		8,800	-