Question

Vernon Yung practices medicine under the business title Vernon Yung, M.D., P.C.
During July, the medical practice completed the following transactions:
Jul 1	Yung deposited $68,000 cash in the business bank account.
	The business issued common stock to Yung.
5	Paid monthly rent on medical equipment, $560.
9	Paid $16,000 cash to purchase land for an office site.
10	Purchased supplies on account, $1,600.
19	Borrowed $23,000 from the bank for business use. Yung signed a note payable to the bank
	in the name of the business.
22	Paid $1,300 on account.
31	Revenues earned during the month included $6,500 cash and $5,00 on account.
31	Paid employees’ salaries $2,500, office rent $1,100, and utilities $400.
	Make a single compound entry.
31	Paid cash dividends of $7,000.
Prepare accounting equation

Answer 1

Accounting equation is as below:

Assets = Liabilities + Capital

Each and every transaction must follow this equation while making entry.

Date		Assets	=	Liabilities	+	Capital
						Common stock	+	Retained earnings
Jul.1		+ 68,000	=	0	+	+ 68,000	+	0
5.		-560	=	0	+	0	+	-560
9.		+ 16,000 -16,000	=	0	+	0	+	0
10.		+ 1,600	=	+1,600	+	0	+	0
19.		+ 23,000	=	+ 23,000	+	0	+	0
22.		-1,300	=	-1,300	+	0	+	0
31.		+ 6,500 + 500	=	0	+	0	+	+ 7,000
31.		-4,000	=	0	+	0	+	-4,000
31.		-7,000	=	0	+	0	+	-7,000
Total		86,740	=	23,300	+	68,000	+	-4,560

  

The total figure must satisfy the accounting equation, which happens in the above table.

Assets = 86,740

Liabilities + Capital = 23,300 + 68,000 – 4,560 = 86,740