Jean Howard established an insurance agency on July 1 of the current year and completed the following transactions during July:

a. Opened a business bank account with a deposit of $50,000 from personal funds.

b. Purchased supplies on account, $1,600.

c. Paid creditors on account, $500.

d. Received cash from fees earned on insurance commissions, $9,250.

e. Paid rent on office and equipment for the month, $2,500.

f. Paid automobile expenses for month, $900, and miscellaneous expenses, $300.

g. Paid office salaries, $1,900.

h. Determined that the cost of supplies on hand was $550; therefore, the cost of supplies used was $1,050.

i. Billed insurance companies for sales commissions earned, $11,150.

j. Withdrew cash for personal use, $2,700.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

2. Briefly explain why the owner's investment and revenues increased owner's equity, while withdrawals and expenses decreased owner's equity.

Transcribed Image Text:

Owner's Equity Assets Liabilities + Jean Howard, Payable + Capital Jean Howard, Drawing + Earned Supplies Expense Auto Expense - Accounts Accounts Fees Salaries Misc. Expense Cash + Receivable + Supplies Expense %3D Expense