Abramson Financial Services was formed on May 1, 2014. The following events and transactions are from its first month:

May 1 Jacob Abramson invested $40,000 cash and equipment worth $10,000 in the company.

1. Hired one employee to work in the office for a salary of $2,475 per month.

2. Paid $3,300 cash for a one-year insurance policy.

5 Signed a two-year rental agreement on an office and paid $4,800 cash. Half was for the May 2014 rent and the other half was for the final month's rent. (The portion for the final month is considered prepaid rent.)

8 Purchased additional equipment costing $17,000. A cash payment of $7,000 was made immediately.

Signed a note payable for the balance.

9. Purchased supplies for $500 cash.

15. Purchased more supplies for $750 on account.

17. Completed a contract for a client for $3,000 on account.

22. Paid $250 for May's telephone bill.

25. Completed services for a client and immediately collected $1,100.

26. Paid Jacob Abramson $1,600 cash for his personal use.

28. Collected $2,500 from the client billed on May 17.

30. Paid for the supplies purchased on account on May 15.

30. Paid $50 interest expense on the note payable.

31. Received a cash advance of $500 for services to be completed in June.

31. Paid the employee's monthly salary, $2,475.

Instructions

(a) Prepare journal entries to record the transactions.

(b) Post the journal entries to ledger accounts. Use T accounts.

(c) Prepare a trial balance as at May 31, 2014.

TAKING IT FURTHER Jacob asks if the change in his cash account balance, from the beginning to the end of the month, is equal to his profit or loss for the month. Explain to Jacob whether or not this is true and why.