Black Ltd commenced trading on 1 September Year 3 and is preparing its accounts for the year ended 31 August Year 4. During its first year of trading, the company pays total telephone company invoices of £4,300. The 3-month invoice paid in July Year 4 includes calls of £1,200 for the quarter up to 30 June Year 4 and advance rental of £960 for the quarter to 30 September Year 4. The invoice received in October Year 4 includes calls of £840 for the quarter up to 31 September Year 4 and advance rental of £1,200 for the quarter to 31 December Year 4.

(a) Show calculations of the telephone expense to be recorded in the income statement (profit and loss account) of Black Ltd for its first year of trading.

(b) Explain the effect on the accounting equation.