Task 1: The expanded accounting equation

Michael Brown opened his law office on June 1, 2013. During the first month of operations, Michael conducted the following transactions:

Apr. 1 Invested $6000 in cash into the law practice

Apr. 1 Paid $600 for office equipment

Apr. 3 Purchased additional office equipment on account, $1000

Apr. 5 Received cash for performing legal services for client, $2000

Apr. 8 Paid part-time salaries, $800

Apr. 12 Performed legal services for clients on account, $1000

Apr. 15 Paid rent, $1200

Apr. 20 Withdrew $500 from his law practice for personal use

Apr. 22 Received $500 from clients in partial payment for actions performed on Apr. 12

Apr. 23 Purchased additional office supplies on credit, $2000

Apr. 30 Paid $1700 cash for an assistants salary for the second half of the month

Apr. 30 Withdrew $2400 cash from the business for personal use

What you will do

Use the proper accounting procedure to place the above transactions correctly in the fillable document called Blank Accounting Ledger Paper, found in your Locker. After completing the transactions, make sure that you balance each column. Dont forget to save the document and submit it, along with this one, for marking.

Task 2: Effects of a transaction on asset/liability/owners equity

In the following table, identify how each of the following transactions affects the companys financial statements. For the balance sheet, identify how each transaction affects total assets, total liabilities, and owners equity. If there is an increase, place a + in the column or columns. If there is decrease, place a in the column or columns.

The line for the first transaction is completed as an example

Transaction Total assets Total liabilities Equity Example

	Purchased supplies	+/	n/a	n/a
1	Owner invested cash
2	Bought equipment
3	Made partial payment on bill
4	Collected cash for services completed
5	Received partial payment
6	Borrowed cash with note payable
7	Sold services on credit
8	Bought equipment on account
9	Collected receivable from (7)
10	Bought asset with note payable

Task 3: Short answers

Answer the following three questions in a couple of sentences, using your own words.

Why is the business entity principle important?

Describe the cost principle and explain why it might be considered reliable.

A customer pays cash today for a product that is to be delivered next month. When should revenue be recognized?

Task 4: Journal entries

In October, Carlene Souza opened a financial planning center in downtown Brampton. Help her out by journalizing the following transactions for October 2010 in the fillable table that follows:

Oct. 2 Carlene invested $4100 worth of computer equipment, as well as $10 500 cash, in the new business.

Oct. 6 Purchased computer supplies on account from Free Enterprise, $355

Oct. 9 Purchased office equipment on account from BZ Stationery, $1895

Oct. 13 Carlene paid her home telephone bill from the company bank account, $55.

Oct. 20 Received $875 cash for financial planning services performed

Oct. 21 Advertising bill was received but not yet paid, $450

Oct. 23 Cleaning bill was received but not yet paid, $95

Oct. 27 Performed financial planning services for Harriet Corp., $2725; however, payment will not be received until April

Oct. 28 Paid salaries expense, $2100

Oct. 29 Paid BZ Stationery half the amount owed from Oct. 9 transaction, $947.50

Oct. 30 Received bill for repairs on equipment, $250 to be paid in November

The chart of accounts for the company includes the PR code # after each account's title: Cash, 111; Accounts receivable, 112; Computer supplies, 116; Office equipment, 120; Computer equipment, 121; Accounts payable, 211; Carlene Souza, capital, 311; Carlene Souza, withdrawals, 312; Planning fees earned, 411; Advertising expense, 511; Salaries expense, 512; Repairs expense, 513; and Cleaning expense, 514.

Carlene Souza

Date Account titles and explanation PR Debit Credit