Analyze transactions using the accounting equation
The accounting equation
You own an independent CPA firm. One client had the following transactions in January 20×7.
- Issued share capital for $5,000 cash
- Purchased $3,000 of equipment on credit
- Paid $600 cash for this month’s rent
- Purchased on credit $3,000 of supplies to be used next month
- Billed $3,500 to customers for repairs made to date
- Paid cash for one-half of the amount owing in Transaction 4
- Collected $400 cash of the amount billed in Transaction 5
- Sold one-half of the equipment purchased in Transaction 2 for $1,500 in cash
Use the four steps in the accounting process to analyze business transactions, a) Identifying transactions and source documents, b) Analyzing transactions using the accounting equation, c) Recording the journal entry and d) Posting the entry to the ledger to complete the following:
- Prepare journal entries for each of the above transactions.
- Post the journal entries to T–accounts and total the accounts.
- From the T–accounts, prepare an unadjusted trial balance. List expenses in alphabetical order.
Use the following chart of accounts names and the template:
Cash, Capital Stock, Equipment, Accounts Payable, Rent Expense, Supplies, Accounts Receivable, Revenue.