using the account equation for transaction analysis and prep

using the account equation for transaction analysis and preparing financial statement

Allen Shonton recently opened his own accounting firm on April 1, which he operates as a sole proprietorship. The name of the new entity is Allen Shonton, CPA. Shonton experienced the following events during the organizing phase of the new business and its first month of operations in 2018.

April 5- Shonton deposited $75,000 in a new business bank account titled Allen Shonton, CPA. The business gave capital to Shonton.

April 6- Paid $300 cash for letterhead stationery for new office.

April 7- Purchased office furniture for the office on account, $9500 April 10, consulted with tax client and received $4000 for services rendered. April 11, paid $190 for utilities April 12 finished tax hearing on behalf of a client and submitted a bill for accounting services, $20,000 April 18, paid office rent $750 April 25 received amount due from client that was billed on april 12 April 27th paid full amount of accounts payable created april 7th April 30th Ahonton withdrew cash of $3500

1. Analyze the effects of the events on the accounting equation of Allen Shonton, Cpa.

2. Prepare the following financial statements: A. income statement B. Statement of owners equity. C. Balance sheet

Solution

1 Date Assets = Liabilities + Equity Expenses Revenues Cash Office Furniture Accounts Receivable Accounts Payable Shonton\'s Capital Shonton\'s drawings Printing & Stationery Utility Expense Office rent Service Revenue 5-Apr 75000 75000 6-Apr -300 -300 300 7-Apr 9500 9500 10-Apr 4000 4000 4000 11-Apr -190 -190 190 12-Apr 20000 20000 20000 18-Apr -750 -750 750 25-Apr 20000 -20000 27-Apr -9500 -9500 30-Apr -3500 -3500 Total 84760 9500 0 0 97760 -3500 300 190 750 24000 2 Income statement Revenues: Service revenue (A) 24000 Expenses: Printing & Stationery 300 Utility Expense 190 Office rent 750 Total (B) 1240 Net income (A)-(B) 22760 Statement of owner\'s equity: Beginning capital balance 0 Add:Contribution to capital 75000 Net income for the year 22760 Ending capital balance 97760 Less:Withdrawals 3500 Owner\'s equity 94260 Balance sheet Assets Cash 84760 Office furniture 9500 Total 94260 Liabilities and Owner\'s equity Owner\'s equity: Shonton\'s Capital (Refer 1.2) 97760 Shonton\'s drawings -3500 Total 94260