ANALYSIS OF TRANSACTIONS AND THE ACCOUNTING EQUATION

TRANSACTION ANALYSIS AND DETAILED ACCOUNTING EQUATION
  1. On January 1, 20X5, Thomas Simard opens a new bank account and deposits $30,000 into his sole proprietorship account as an investment.
  2. Thomas Simard obtains a $10,000 line of credit for his business.
  3. On January 5, 20X5, purchase of computer equipment at a price of $5,000. Payment is made using his line of credit.
  4. On January 10, 20X5, opening of an account with ABC office supplier for the purchase of office supplies on credit payable the following month. Purchase of $400 worth of office supplies.
  5. On January 31, 20X5, Thomas Simard sends his client the sales invoice for his professional fees of $10,000 for the month of January 20X5.
  6. On January 31, receipt of invoices for the rent of $700.
  7. On February 15, 20X5, Thomas Simard receives a check for $10,000 for the payment of his professional fees.
  8. On February 25, 20X5, payment of the entire invoice to its supplier Bureau ABC in the amount of $400.
  9. On February 28, 20X5, payment of $2,500 on the company's line of credit.
  10. On February 28, 20X5, payment of bank charges and interest of $45.
  11. On March 1, 20X5, Thomas Simard contributed $2,000 in capital to the business.
  12. On March 2, 20X5, Thomas Simard withdraws $5,000 from his business.

Operations analysis

1) Determine the accounts affected by the operation

Received: + $30,000 cash = + ASSETS

Given: + $30,000 Owner's Capital = + EQUITY

Balance the accounting equation See transaction 1 of the table

2) Determine the accounts affected by the operation

Received: nothing

Given: nothing

Balancing the Accounting Equation The line of credit must be used to allocate a transaction.

3) Determine the accounts affected by the operation

Received: + $5,000 computer equipment = + ASSETS

Given: + $5,000 line of credit = + LIABILITIES Balancing the accounting equation

4) Determine the accounts affected by the transaction Received: + $400 supplies = + ASSETS Given: + $400 supplier = + LIABILITIES

Balancing the Accounting Equation

5) Determine the accounts affected by the operation

Received: + $10,000 accounts receivable = + ASSETS

Given: + $10,000 professional fees = EQUITY - REVENUE

Balancing the accounting equation An income increases the owner's wealth (equity)

6) Determine the accounts affected by the operation

Given: - 700 rent = EQUITY - EXPENSES

Given: + 700 Accounts Payable = ACCOUNTS PAYABLE

An expense reduces the owner's wealth (equity).

Balancing the Accounting Equation

7) Determine the accounts affected by the operation

Receipt: + $10,000 cash = ACTIVE

Given: - $10,000 in cash = CLIENT ACCOUNTS

Balancing the Accounting Equation

8) Determine the accounts affected by the operation

Receipt: + $400 cash = ACTIVE

Given: + $400 accounts payable = LIABILITIES

Balancing the Accounting Equation

9) Determine the accounts affected by the operation

Receipt: + $2,500 cash = ACTIVE

Given: - $2,500 line of credit = LIABILITIES

Balancing the Accounting Equation

10) Determine the accounts affected by the operation

Receipt: + $45 cash = ACTIVE

Given ; - $45 in interest charges = EQUITY

An expense reduces the owner's wealth (equity) Balance the accounting equation

11) Determine the accounts affected by the operation

Received: + $2,000 cash = ASSETS Given; + $2,000 in capital contribution = EQUITY - CONTRIBUTIONS

An expense reduces the owner's wealth (equity)

Balancing the Accounting Equation

12) Determine the accounts affected by the operation

Received: - $5,000 cash = ACTIVE

Given ; - $5,000 capital withdrawal = EQUITY - WITHDRAWAL

An expense reduces the owner's wealth (equity)

Balancing the Accounting Equation

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