in $2019,$ Riyadh$-$based Omar Abdullah $($Abdullah$)$ and Sara Al Faisal $($Al Faisal$)$ launched their

maiden entrepreneurial venture, the KSA Corporation $($KSA Corp$),$ as an incorporated business

in the capital city of the Kingdom of Saudi Arabia $($Kingdom$,$ Saudi Arabia$).$ KSA Corp focused

on providing clients in the Kingdom with Software as a Service, popularly known as SaaS, and selling

hardware. Celebrating the first anniversary of KSA Corp operations in November of $2020,$ Abdullah

and Al Faisal had $$ what they believed $$ to be a successful first year and congratulated each other on

the business doing well. Every project they had landed was profitable and earned them rave reviews

from the clientele but were still unable to adumbrate exactly how well the business was doing or make

informed decisions on the way forward.

But truth be told, throughout the entire first year, the Saudi entrepreneurs had been overwhelmed

with pitching to new clients and subsequently delivering SaaS solutions and had neglected the

accounting responsibilities of the business. But even though the duo did not record transactions

formally, they had maintained all the relevant paperwork and emails, either online or offline.

Balancing the Books

While Abdullah wanted to launch the next phase of their strategic plan and take on bigger clients, a

concerned Al Faisal voiced her concern that $$ in accordance with their original vision $$ KSA Corp

should be a data$-$driven organization and even they, as entrepreneurs, needed to make informed

decisions that stemmed from deep business and financial analysis. She impressed upon Abdullah the

importance of hiring a qualified accountant to first, streamline the startup$$s previous year records and

then $$ drawing on wisdom from the relevant financial statements $$ they could charter further plans

for the company.

Two weeks later, KSA Corp hired an experienced accountant who was presented with the following

transactions for the company$$s first$-$year activities $($financial year is from January to December$)$ and

informed Abdullah and Al Faisal that he would classify these transactions according to the accounting

equation and identify which financial statements were affected by each.

$1.$ Beginning of Year $1,$ Abdullah and Al Faisal had each invested SAR $100,000$ in exchange for

common stock in the business $($company to be assumed was a corporation$)$

$2.$ At beginning of the year, KSA Corp purchased laptops and other hardware worth SAR $50,000,$

half paid for in cash, with the remaining balance due in $2$ months. The useful life of these items

was estimated to be four years.

$3.$ Purchased different hardware for sale: total value SAR $20,000$

$4.$ Also, at the beginning of the year, KSA Corp hired two developers for a monthly salary of SAR

$20,000$ each.

$5.$ KSA Corp rented a facility with rent paid upfront for the year, SAR $40,000.$

$6.$ KSA Corp sold hardware for SAR $10,000$ cash, which cost them SAR $7,500$

$7.$ The founders developed their own software, through KSA Corp$$s developers, which was used to

analyse social media postings $$ and was valued at SAR $20,000$ in terms of R&D $(60/40)$

$8.$ Total SaaS services provided during the year were worth SAR $1,200,000.$ Of this, SAR $800,000$

were paid in cash during the year, while SAR $400,000$ was still outstanding.

$9.$ At the end of first month, the founders recognised the first of month of rent consumed.

$10.$ Salaries were paid as follows: SAR $432,000$ to employees and SAR $48,000$ paid to GOSI, the

government agency.

$11.$ Of the outstanding accounts, KSA Corp had to write$-$off an account worth SAR $30,000$ because

the customer has declared insolvency and was unable to pay.

$12.$ Made cash investments in short$-$term equity, valued at SAR $5,000.$

$13.$ Overtime for the last month of Year $1$ has not been credited to employees as yet by the beginning

of Year $2.$ Total value: SAR $10,000.$

$14.$ Remaining operating expenses for the year totalled SAR $100,000.$

$15.$ On $1$ January, the founders secured a $5-$year bank loan at SAR $50,000,$ interest rate $5\%.$

$16.$ At the beginning of December, a customer paid SAR $40,000$ for SaaS services to be delivered

over the next two months.

$17.$ At the end of the year, the founders sold their cash investment for SAR $8,000$

$18.$ By the end of the year, the founders recognised all rent consumed

With his work cut out, the accountant took stock of all the online$/$offline paperwork and emails and

wondered which method should he adopt to organize the accounting records for KSA Corp.

a$)$ Prepare an accounting equation$-$based analysis for the above transactions.

b$)$ Prepare journal entries and post to ledger accounts.

c$)$ Prepare the income statement and statement of financial position for Year $1$ of operations.

d$)$ Prepare the cash flow statement of Year $1.$