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Balance Sheet Owner's Equity Statemen T Income Stateme NT Statement of Cash Flows

The accounting firm, Virmari & Co., recorded the following transactions in August: 1) The owner invested $25,000 in cash in the business. 2) The company purchased $7,000 of office equipment on credit. 3) The company received $8,000 in cash for services performed. 4) The company paid $850 in rent for the month. 5) The owner withdrew $1,000 in cash for personal use.

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194 views2 pages

Balance Sheet Owner's Equity Statemen T Income Stateme NT Statement of Cash Flows

The accounting firm, Virmari & Co., recorded the following transactions in August: 1) The owner invested $25,000 in cash in the business. 2) The company purchased $7,000 of office equipment on credit. 3) The company received $8,000 in cash for services performed. 4) The company paid $850 in rent for the month. 5) The owner withdrew $1,000 in cash for personal use.

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Sesma
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Transactions made by Virmari & Co.

, a public accounting firm, for the month of


August are shown below. Prepare a tabular analysis which shows the effects
of these transactions on the expanded accounting equation, similar to that
shown in Illustration 1-8.
1. The owner invested $25,000 cash in the business.
2. The company purchased $7,000 of office equipment on credit.
3. The company received $8,000 cash in exchange for services performed.
4. The company paid $850 for this month’s rent.
5. The owner withdrew $1,000 cash for personal use.

Companies prepare four financial statements :

Owner’s
Income Statement
Equity Balance
Stateme of Cash
Statemen Sheet
nt Flows
t
TRANSACTION 1. INVESTMENT BY OWNER Ray Neal decides to start a
smartphone app development company which he names Softbyte. On
September 1, 2017, he invests $15,000 cash in the business. This transaction
results in an equal increase in assets and owner’s equity.

TRANSACTION 2. PURCHASE OF EQUIPMENT FOR CASH Softbyte Inc. purchases


computer equipment for $7,000 cash.

TRANSACTION 3. PURCHASE OF SUPPLIES ON CREDIT Softbyte Inc. purchases for


$1,600 headsets and other accessories expected to last several months. The supplier allows
Softbyte to pay this bill in October.

TRANSACTION 4. SERVICES PERFORMED FOR CASH Softbyte Inc. receives


$1,200 cash from customers for app development services it has performed.

TRANSACTION 5. PURCHASE OF ADVERTISING ON CREDIT Softbyte Inc.


receives a bill for $250 from the Daily News for advertising on its online website but
postpones payment until a later date.

TRANSACTION 6. SERVICES PERFORMED FOR CASH AND CREDIT.


Softbyte performs $3,500 of services. The company receives cash of $1,500 from
customers, and it bills the balance of $2,000 on account.

TRANSACTION 7. PAYMENT OF EXPENSES Softbyte Inc. pays the following


expenses in cash for September: office rent $600, salaries and wages of employees
$900, and utilities $200.

TRANSACTION 8. PAYMENT OF ACCOUNTS PAYABLE Softbyte Inc. pays its


$250 Daily News bill in cash. The company previously (in Transaction 5) recorded the
bill as an increase in Accounts Payable.

TRANSACTION 9. RECEIPT OF CASH ON ACCOUNT Softbyte Inc. receives


$600 in cash from customers who had been billed for services (in Transaction 6).

TRANSACTION 10. WITHDRAWAL OF CASH BY OWNER Ray Neal withdraws


$1,300 in cash in cash from the business for his personal use.

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