Sample Problem
Chapter 2
Analyzing the effects of transactions on the accounting equation.
On September 1, Mireya Cortez opened Self Images Tutoring Service.InstructionsAnalyze the following transactions. Use the fundamental accounting equation form to record the changes in
property, claims of creditors, and owner’s equity. (Use plus, minus, and equals signs.)Transactions1. The owner invested $9,000 in cash to begin the business. 2. Purchased equipment for $4,000 in cash. 3. Purchased $1,500 of additional equipment on credit. 4. Paid $750 in cash to creditors. 5. The owner made an additional investment of $1,500 in cash. 6. Performed services for $1,080 in cash. 7. Performed services for $780 on account. 8. Paid $650 for rent expense. 9. Received $550 in cash from credit clients. 10. Paid $775 in cash for office supplies. 11. The owner withdrew $1,000 in cash for personal expenses.
Transaction #1
Assets = Liabilities + Owner’s EquityCash
+$9,000 +$9,000
Transaction #2
Assets = Liabilities + Owner’s EquityCash
$9,000 $9,000
Equipment
+ 4,000
Cash
- 4,000
Transaction #3
Assets = Liabilities + Owner’s EquityCash
9,000
-4,000
5,000
Equipment
4,000 9,000
Equipment Account Payable
+1,500 +1,500
Transaction #4
Assets = Liabilities + Owner’s Equity Cash
5,000
Equipment
4,000
+1,500 Accounts Payable
5,500 1,500 9,000
Cash Accounts Payable
-750 -750
Transaction #5
Assets = Liabilities + Owner’s EquityCash Account Payable
5,000 1,500
- 750 - 750
4,250 750
Equipment
5,500 9,000
Cash Investment
+1,500 +1,500
Transaction #6
Assets = Liabilities + Owner’s EquityCash
4,250 9,000
+1,500 +1,500
5,750 10,500
Equipment Accounts Payable
5,500 750
Cash Revenue
+1,080 +1,080
Transaction #7
Assets = Liabilities + Owner’s EquityCash
5,750 10,500
+1,080 +1,080
6,830 11,580
Equipment Accounts Payable
5,500 750
Account Receivable Revenue
+780 +780
Transaction #8
Assets = Liabilities + Owner’s EquityCash
6,830
Account Receivable 11,580
780 + 780
Equipment Account Payable 12,360
5,500 750
Cash Expense
-650 -650
Transaction #9
Assets = Liabilities + Owner’s EquityCash
6,830 12,360
- 650 - 650
6,180 11,710
Accounts Receivable
780
Equipment Accounts Payable
5,500 750
Cash
+550
Account Receivable
-550
Transaction #10
Assets = Liabilities + Owner’s EquityCash6,180+ 5506,730Accounts Receivable 780-550 230Equipment Accounts Payable5,500 750 11,710
Cash-775Supplies+775
Transaction #11
Assets = Liabilities + Owner’s EquityCash6,730- 7755,955Accounts Receivable230Equipment5,500Supplies Accounts Payable775 750 11,710
Cash Withdrawal-1,000 -1,000
Final Balances
Assets = Liabilities + Owner’s EquityCash Accounts Payable
5,955 750 11,710
-1,000 -1,000
4,955 10,710
Accounts Receivable
230
Equipment
5,500
Supplies
775
Analysis
Transaction 3 increased the company’s debt by $1,500