Seth Feye established Reliance Financial Services on July 1

Seth Feye established Reliance Financial Services on July 1, 2016. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow:

Instructions
1. Prepare an income statement for the month ended July 31, 2016.
2. Prepare a statement of owner’s equity for the month ended July 31, 2016.
3. Prepare a balance sheet as of July 31, 2016.
4. Prepare a statement of cash flows for the month ending July 31, 2016.

Solution

Ans.1 Income Statement for the month ended july 31, 2016 Particulars Amt. ($) Total Fees Earned          144,500 Total (A)          144,500 Less: Expenses Salaries Expenses            55,000 Rent Expenses            33,000 Auto Expenses            16,000 Supplies Expenses              4,500 Misc. Expenses              4,800 Total (B)          113,300 Net Income (A - B)            31,200 Ans.2 Statement of owner\'s equity for the month ended july 31, 2016 Particulars Amt. ($) Capital Introduce            50,000 Less: Drawings            15,000 Add: Net Income            31,200 Closing Capital            66,200 Ans.3 Balance sheet as on july 31, 2016 Assets: Amt. ($) Cash            32,600 Accounts receivable            34,500 Supplies              2,500 Total            69,600 Liabilities: Owner\'s Equity            66,200 Accounts payable              3,400 Total            69,600 Ans.4 Statement of Cash flow for the month ending july 31, 2016 Particulars Amt. ($) Cash flow from operating activities: Cash receipt from fees          144,500 Less: Expenses Salaries Expenses            55,000 Rent Expenses            33,000 Auto Expenses            16,000 Supplies Expenses              4,500 Misc. Expenses              4,800 Operating profit before working caoital changes            31,200 Add: Increase in Accounts payable              3,400 Less: Increase in Accounts receivable            34,500 Less: Increase in Supplies              2,500 Net cash from operating activities          (2,400) Cash flow from investing activities:                   -   Cash flow from financing activities: Capital Introduce            50,000 Drawings          (15,000) Net cash flow from financing activities          35,000 Net increase/(Decrease) in cash and cash equivalents          32,600 Add: cash and cash equivalents in the beginning                   -   cash and cash equivalentrs at the end          32,600