Accounting Exercise 2.2 (Accounting for Accruals)
The following transactions relate to Coast Services in 20X8:
1) Started business when the owners contributed $3,700;
2) Paid cash for rent expense in amount of $500;
3) Provided services to clients and billed them $2,800 (cash will be received
later);
4) Incurred $1,900 operating expenses on account;
5) Paid cash on accounts payable originated in Event No.4;
6) Made $1,000 cash distribution to the owners;
7) Collected $500 against accounts receivable;
8) Performed additional services for $1,200 cash.
Required:
a) Classify all transactions as asset source, asset use, asset exchange,
or claim exchange;
b) Show the transaction effects on the financial statements using a horizontal
statements model like the one presented below. Use n/a (Not Applicable)
to indicate that an element is not affected by an event. In the statement
of cash flows FA stands for financing, OA stands for operating, and IA
stands for investing activities.
| Event |
Assets |
= |
Liab. |
+ |
Equity |
Rev. |
- |
Exp. |
= |
Net |
Cash |
|||||
| Cash |
+ |
Acc. |
= |
Acc. |
+ |
Cont. |
+ |
Ret. |
||||||||
| 1 |
3,700 |
+ |
n/a |
= |
n/a |
+ |
3,700 |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
3,700 |
FA |
Location