Question

At the end of last month, Ajax Inc. had the following balances in its accounts:
Cash $ 5,000
Inventory $10,000
Equipment $ 3,000
Land $10,000
Owe Jones $10,000
Common Stock $10,000
Retained Earnings $ 8,000
Set up the initial Balance Sheet for this month, make the appropriate entries for this month using the Accounting Equation, and show the ending Balance Sheet for this month. The following should be included for this month:
a. Buy inventory from Jones on credit for $10,000
b. Sell goods for $4,000
c. Sell common stock for $1,000
d. Pay wages of $2,000
e. Pay tax of $1,000
f. Sell goods to Smith on credit for $15,000
g. Pay rent of $100
h. Pay Jones $2,000
i. Depreciate equipment $200
j. Inventory at the end of the month is worth $7,000

Answer 1

Balance Sheet of M/s Ajay Inc. at the beginning of the Month
Assets	$	Liabilities	$
Cash	5000	Owing to Jones	10000
Inventory	10000	Retained earnings	8000
Equipment	3000	Common Stock	10000
Land	10000
Total	28000		28000

Treatment of entries during the month using Acounting equation
Assets (Amt in $)		=	Liabilities ($)	+	Capital or Common Stock
Inventory +10000		Jones (Creditor) 10000
Cash (Sale common stock)+1000				Common stock      +1000
Cash(Paid wages) -2000				Retained earnings (paid wages an expense)   -2000
Cash (Tax paid)       -1000				Retained earningTax paid (expense) -1000
Cash(Rent paid)   -100				Retained earning(Rent paid (expense)   -100
Cash (Paid to Jones-Creditor) -2000		Jones(Creditor) -2000
Equipment (Depreciation) -200				Retained earning (Expense Depreciation)   - 200
Inventory (Sale) - 13000				Retained earning (profit on sale) +6000
Cash (sale Inventory) +4000
Smith (Debtor) + 15000

Net position of above equation (in $)
			Jones(Creditor)	8000
	Cash	-100	Common Stock	1000
Equipment	-200	Retained earning	2700
Smith(Debtor)	15000
Inventory	-3000

Inventory Position ($)
opening Inventory	10000
Buy Inventory Jones	10000
Profit on sale of goods- balancing figure	6000
	26000
Selling goods	4000
Selling goods to Smith on credit	15000
Inventory at the end of month	7000

Balance Sheet at the end of the month
Assets( $)		Liabilities ($)
Cash	4900	Owing to Jones	18000
Inventory	7000	Common Stock	11000
Equipment	2800	Retained earnings	10700
Land	10000
Smith	15000
Total	39700				39700