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Faculty Profile

⚫ ATM Adnan
Assistant Professor,
Department of Business Administration, BUFT

⚫ M.Sc. In Accounting and Finance (2018)

University of Wales, Bangor, United Kingdom.
⚫ MBA in Accounting and Information Systems (2013)
University of Dhaka.
⚫ BBA in Accounting and Finance (2011)
American International University-Bangladesh (AIUB)

⚫ Courses Conducting: Principles of Accounting, Business Finance,

Financial Management, Taxation, Cost and Management Accounting,
Intermediate Accounting, Accounting Theory.
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 Text Book

⚫ Accounting Principles
12th Edition (International Student Version)
Jerry J. Weygandt, Paul D. Kimmel, Donald E.
Kieso

1-3
 Rationality

I am a AMT student, why should I

have to study Accounting?

1-4
 Rationality

Number of 7000 5200 6000

employee
Size of 900 lines 760 lines 800 lines
Factory

Net Profit 120 Crore 80 Crore -2 Crore

or Loss

Investmen 1200 Cr. (10%) 500 Cr. (16%) 600 Cr.

t or Sales
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 1 Accounting in Action

Learning Objectives
After studying this chapter, you should be able to:
[1] Explain what accounting is.
[2] Identify the users and uses of accounting.
[3] Explain generally accepted accounting principles.
[4] Explain the monetary unit assumption and the economic entity
assumption.
[5] State the accounting equation, and define its components.
[6] Analyze the effects of business transactions on the accounting equation.
[7] Understand the four financial statements and how they are prepared.

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 Preview of Chapter 1

Accounting Principles
Eleventh Edition
Weygandt Kimmel Kieso
1-7
 What is Accounting?
Accounting is an information system. It measures business
activities, processes data into reports, and communicates results
to decision makers.
Accounting is the language of business.

Purpose of accounting is to:

1. Identify economic events, [Examples of economic events are

the sale of Apparels by H&M and payment of wages by M&S]

2. Recording [keeping a systematic, chronological diary of events,

also classifies and summarizes economic events]

3. Communicate the economic events of an organization to

1-8 interested users through Financial Statements.
 What is Accounting?
Illustration 1-1 Financial Statements
Three Activities Accounting process

Sale of Goods & Service

The accounting process includes

the bookkeeping function.

Analysis involves use of ratios, percentages, graphs, and charts to highlight

1-9 significant financial trends and relationships.
 Who Uses Accounting Data
Internal users of accounting information are managers who plan, organize, and
run the business. These include marketing managers, production supervisors,
finance directors, and company officers.

Internal
Users
MANAGEMENT
MARKETING Which H&M product line is
What price should M&S the most profitable? Should any
charge for its new product product lines be eliminated?
line to maximize the
company's net income?

FINANCE
Is cash sufficient to pay
dividends to Microsoft Human Resource MGT
stockholders? Can the factory afford
to give its employees pay
1-10 raises this year? LO 2
 Who Uses Accounting Data
External
Users

Creditors (such as suppliers and bankers)

use accounting information to evaluate
the risks of granting credit or lending
money.
Investors
Is Square Textile
earning satisfactory
income?
Investors (owners) use Taxing Authorities and
accounting information to Government
How does BEXIMCO compare
decide whether to buy, hold, Whether the company
in size and profitability with
or sell ownership shares of a SQUARE? complies with tax
company. Laws and Prescribed
1-11 Rules
 The Building Blocks of Accounting

Accounting Standards

International Accounting Standards Board (IASB)

http://www.iasb.org/

International Financial Reporting Standards (IFRS)

Financial Accounting Standards Board (FASB)

http://www.fasb.org/

Generally Accepted Accounting Principles (GAAP)

1-12 SO 4 Explain accounting standards and the measurement principles.

 Accounting Standards
The primary accounting standard-setting body in the United States
is the Financial Accounting Standards Board (FASB)

Many countries outside of the United States have adopted the

accounting standards issued by the International Accounting
Standards Board (IASB). These standards are called
International Financial Reporting Standards (IFRS).

In order to increase comparability, in recent years the two

standard-setting bodies have made efforts to reduce the differences
between U.S. GAAP and IFRS. This process is referred to as
convergence.

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 ACCOUNTING PRINCIPLES, ASSUMPTIONS,
AND CONCEPTS

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 ACCOUNTING PRINCIPLES, ASSUMPTIONS,
AND CONCEPTS

⚫ Qualitative characteristics.
⚫ To be relevant, information must be capable of
making a difference to the decision maker, having
predictive or confirming value.
# How many cars he director of a company has, its not
relevant to the performance of the company.

⚫ To faithfully represent, the information must be

complete, neutral (free from bias), and without material
error. Faithful representation makes the information
reliable to users.
# Any bias to exaggerate the profitability in Financial
1-15 Statement will affect the Faithful representation.
 ACCOUNTING PRINCIPLES, ASSUMPTIONS,
AND CONCEPTS
⚫ Comparability means that the accounting information for a
company must be prepared in such a way as to be capable of being
both compared with information from other companies in the same
period. consistent with similar information for that company in previous
periods.
⚫ Verifiability means that the information must be capable of being
checked for accuracy, completeness, and reliability. The process of
verifying information is often done by internal as well as external
auditors. Verifiability enhances the reliability of information, and thus
makes the information more representative of economic reality.
⚫ Timeliness means that the information must be made available to
users early enough to help them make decisions, thus making the
information more relevant to their needs.
⚫ Understandability means that the information must be sufficiently
transparent so that it makes sense to reasonably informed users of the
information (investors, creditors, regulatory agencies, and managers).

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 The Building Blocks of Accounting

Measurement Principles
Historical Cost Principle (or cost principle) dictates that
companies record assets at their cost.

Reason: Cost can be easily verified, where as market value is

often subjective (it depends on who you ask)

For example, if TIPTOP Fashion purchases land for

$300,000, the company initially reports it in its accounting
records at $300,000. But what does TIPTOP do if, by the end of
the next year, the fair value of the land has increased to
$400,000? Under the historical cost principle, it continues to
report the land at $300,000.
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 The Building Blocks of Accounting
Measurement Principles
Fair Value Principle – indicates that
assets and liabilities should be reported at
fair value.
⚫The fair value principle states that assets
and liabilities should be reported at fair
value
⚫In general, most companies choose to
use cost. Only in situations where assets
are actively traded, such as investment
securities, is the fair value principle
applied.
⚫For example, certain investment
securities are reported at fair value
because market price information is
usually
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readily available for these types of
assets.
 The Building Blocks of Accounting
The Revenue Recognition Principle states that revenue
should be recognized and recorded when it is realized or realizable
and when it is earned.
REVENUES are recognized as soon as a product has been
sold or a service has been performed, regardless of when
the money is actually received.
For example, if ABC Fashion completes its service at an agreed
price of $1,000, ABC should recognize $1,000 of revenue as soon as
its work is done—it does not matter whether the client pays the
$1,000 immediately or in 30 days. Do not confuse revenue with a
cash receipt.

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 The Building Blocks of Accounting
Conditions for Revenue Recognition
According to the IFRS criteria, for revenue to be recognized, the following
conditions must be satisfied:
•Risks and rewards have been transferred from the seller to the buyer.
•The seller does not have control over the goods sold.
•The collection of payment from goods or services is reasonably assured.
•The amount of revenue can be reasonably measured.
•Costs of revenue can be reasonably measured.

Conditions (1) and (2) are referred to as Performance. Regarding

performance, it occurs when the seller has done what is to be expected to be
entitled to payment.
Condition (3) is referred to as Collectability. The seller must have a
reasonable expectation that he or she will be paid for the performance.
Conditions (4) and (5) are referred to as Measurability. Due to the
accounting guideline of the matching principle, the seller must be able to
match the revenues to the expenses. Hence, both revenues and expenses
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should be able to be reasonably measured.
 The Building Blocks of Accounting
⚫ Revenue Recognition Principles-Example:1
Suppose that Exotic Retail Sold 1000 pieces of Shirts @ 100/Each to
Elegant Fashion on 15th of June, 2017. but Elegant Fashion has
not paid Cash to Exotic Retail. On 2nd of August Elegant Paid full to
Exotic.
⚫ Accounting Treatment:
Exotic Company must record Sales revenue of 100,000 on 15th June
in their book of Account not on 2nd of August.
Example:2
Johnson Fashion is an designing firm that provides Fashion consulting
work. During December, JF provides $2,000 of consulting work to one of
its clients. The client does not pay for the consulting time until the
following January. According to the revenue recognition principle, JF
should record the revenue in December because the revenue was
realized and earned in December even though it was not received until
January.
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 The Building Blocks of Accounting
Measurement Principles (Expense Recognition Principle)
The Matching Principle states that expenses should be recognized
and recorded when those expenses can be matched with the revenues
those expenses helped to generate.

In other words, expenses shouldn't be recorded when they are paid.

Expenses should be recorded as the corresponding revenues are
recorded.
Examples
BBL Fashion produces denim trousers and sells them to wholesalers.
BBL pays its employees 25000/Month but pays each month salary
within first week of next month. Since the salary expense can be
directly linked back to revenue generated in the current period, the
salary costs are expensed in the current period.
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 The Building Blocks of Accounting
Measurement Principles
MATCHING PRINCIPLE EXAMPLE-2 – ACCRUED
EXPENSES
Let us say that for some work, you hired contract labors and agreed
to pay them $1000. The work is done is the month of July, however,
the labors are paid in the month of August. What is the cost
accounted for in July?

Please note that in matching principle of accounting, for expenses,

the actual date of payment doesn’t matter; It is important to note
when the work was done. In this case study, the work was completed
in July. This recording of such accrued expenses (irrespective of
actual payment made or not) and matching it with the related revenue
is known as Matching Principle of accounting.
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 The Building Blocks of Accounting
Measurement Principles
MATCHING PRINCIPLE EXAMPLE 3 – DEPRECIATION EXPENSE
On July 1, let’s assume that you buy a machinery worth $30,000 and
its useful life is 5 years. How will you record expense for this
transaction in the month of July?
The reported amounts on his balance sheet for assets such as
equipment, vehicles, and buildings are routinely reduced by
depreciation. Depreciation expense is required by the basic
accounting principle known as the matching principle of accounting.
Depreciation is used for assets whose life is not indefinite—equipment
wears out, vehicles become too old and costly to maintain, buildings
age, and some assets (like computers) become obsolete.
For recording depreciation expense as per the matching principle of
accounting, you can calculate the yearly depreciation = 30,000/5 =
$6000 per year. With this depreciation expense charged for the month
of July = $6000/12=$500
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 Generally Accepted Accounting Principles

Assumptions
Monetary Unit Assumption requires that companies
include in the accounting records only transaction data
that can be expressed in terms of money.
Avoid inclusion of health condition of a company owner or
moral of Employees.

The reason: Companies cannot quantify this information

in money terms. Though this information is important,
companies record only events that can be measured in
money.

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 The Building Blocks of Accounting

⚫ Economic Entity Assumption requires

that activities of the entity be kept separate and
distinct from the activities of its owner and all
other economic entities.

⚫ Suppose, owner of a company must keep his

personal living cost separate from the expenses
of his business.
⚫ To illustrate, Ms. Cynthia, owner of Cynthia’s
Boutique, must keep her personal living costs
separate from the expenses of the business.
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 Forms of Business Ownership

Sole
Partnership Corporation
Proprietorship
◆ Generally owned ◆ Owned by two or ◆ Ownership
by one person. more persons. divided into
◆ Often small shares of stock
◆ Often retail and
service-type service-type ◆ Separate legal
businesses businesses entity organized
◆ Owner receives under state
◆ Generally
any profits, corporation law
unlimited
suffers any personal liability ◆ Limited liability
losses, and is
◆ Partnership
personally liable
agreement
for all debts.

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 Generally Accepted Accounting Principles

Question
A business organized as a separate legal entity under state law
having ownership divided into shares of stock is a

a. proprietorship.

b. partnership.

c. corporation.

d. sole proprietorship.

LO 5 Explain the monetary unit assumption

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and the economic entity assumption.
 The Basic Accounting Equation

Owner’s
Assets = Liabilities + Equity

Provides the underlying framework for recording and

summarizing economic events.

Assets are claimed by either creditors or owners.

Claims of creditors must be paid before ownership claims.

The accounting equation applies to all economic entities

regardless of size, nature of business, or form of business
organization.

1-29 LO 6 State the accounting equation, and define its components.

 Basic Accounting Equation- Example
Suppose you want to establish a RMG unit, for which you will need 10,000,000
BDT, your father gave you 60,00,000 and for the rest of amount you took a Bank
Loan.

10,000,000 4,000,000 6,000,000

1-30
 The Basic Accounting Equation

Assets
◆ Resources a business owns.
◆ Provide future services or benefits.
◆ The business uses its assets in carrying out such activities
as production and sales.
For example, A RMG units owns a sewing machine that provides
economic benefits from producing garments. Other assets of
RMG factory are building, tables, chairs, washing machine,
iron, and, of course, cash.
Owner’s
Assets = Liabilities + Equity

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 The Basic Accounting Equation
Liabilities
◆ Claims against assets (debts and obligations).
◆ Creditors - party to whom money is owed.
◆ Accounts payable, Wage Payable Notes payable, etc.
◆ A RMG unit, for instance, purchases fabric, yarn,
accessories on credit from suppliers. These obligations are
called accounts payable.
◆ RMG Unit may also have wages payable to labor and sales
and real estate taxes payable to the local government.

= + Owner’s
Assets Liabilities
1-32 Equity
 The Basic Accounting Equation

Owner’s Equity
◆ Ownership claim on total assets.
◆ To find out what belongs to owners, we subtract the creditors’
claims (the liabilities) from assets. The remainder is the owner’s
claim on the assets—the owner’s equity. Since the claims of
creditors must be paid before ownership claims, owner’s equity is
often referred to as residual equity.
◆ Investment by owners and Revenues (+)
◆ Drawings and Expenses (-).

Owner’s
Assets Liabilities
= + Equity
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 Owner’s Equity
Illustration 1-6

Increases in Owner’s Equity

 Investments by owner are the assets the owner puts into the
business. They are recorded in a category called owner’s capital.

 Revenues result from business activities entered into for the

purpose of earning income.

➢ Common sources of revenue are: sales, fees, services,

commissions, interest, dividends, royalties, and rent.

1-34
 Owner’s Equity
Illustration 1-6

Decreases in Owner’s Equity

 Drawings An owner may withdraw cash or other assets for
personal use.

 Expenses are the cost of assets consumed or services used in

the process of earning revenue.

➢ Common expenses are: salaries expense, rent expense,

utilities expense, tax expense, etc.

1-35 LO 6 State the accounting equation, and define its components.

 Basic Accounting Equation- Example
Suppose you want to establish a RMG unit, for which you will need 10,000,000 BDT,
your father gave you 60,00,000 and for the rest of amount you took a Bank Loan.

10,000,000 4,000,000 6,000,000 Investment/Capital

After running the factory for 1 months you think of adding a washing unit in your factory
to reduce production cost which will cost you 1,000,000. and you took it from your father.

10,000,000 4,000,000 6,000,000

Equipment 1,000,000 Nil 1,000,000 Re-Investment

You have received an order of 1,000,000 BDT and after successful production and
shipment of order the buyer paid you 1,000,000 BDT in Cash.

10,000,000 4,000,000 6,000,000

1,000,000 Nil 1,000,000

1-36
Cash 1,000,000 Nil 1,000,000 Revenue
 Basic Accounting Equation- Example
Expenses during the production of order, Wages Paid in Cash-250,000, Raw Material
Purchased in cash -300,000 and other overhead in cash of 200,000. Total of 750,000

10,000,000 4,000,000 6,000,000

1,000,000 Nil 1,000,000

1,000,000 Nil 1,000,000

(750,000) (750,000) Expenses

Withdrew cash of 50,000 for personal expense from company’s cash balance/Account

10,000,000 4,000,000 6,000,000

1,000,000 Nil 1,000,000

1,000,000 Nil 1,000,000

(750,000) (750,000)

(50,000) (50,000) Drawing

1-37
 Using the Accounting Equation

Transactions are a business’s economic events recorded

by accountants.
◆ May be external or internal.
◆ Not all activities represent transactions.
◆ Each transaction has a dual effect on the accounting
equation.

1-38
 Using the Accounting Equation

Illustration: Are the following events recorded in the accounting

records?
Discuss
Purchase guided trip
Event computer options with Pay rent
customer

Criterion Is the financial position (assets, liabilities, or

owner’s equity) of the company changed?

Record/
Don’t Record

1-39 LO 7 Analyze the effects of business transactions on the accounting equation.

 Transaction Analysis
Transaction (1): Ray Neal decides to open a computer programming
service which he names Softbyte. On September 1, 2014, Ray Neal
invests $15,000 cash in the business.

1-40
LO 7
 Transaction Analysis
Transaction (2): Purchase of Equipment for Cash. Softbyte purchases
computer equipment for $7,000 cash.

1-41
LO 7
 Transaction Analysis
Transaction (3): Softbyte purchases for $1,600 from Acme Supply
Company computer paper and other supplies expected to last several
months. The purchase is made on account. (On Credit, Postpones, Due, Later
Date)

1-42
LO 7
 Transaction Analysis
Transaction (4): Softbyte receives $1,200 cash from customers for
programming services it has provided.

1-43
LO 7
 Transaction Analysis
Transaction (5): Softbyte receives a bill for $250 from the Daily News
for advertising but postpones payment until a later date.

1-44
LO 7
 Transaction Analysis
Transaction (6): Softbyte provides $3,500 of programming services
for customers. The company receives cash of $1,500 from customers,
and it bills the balance of $2,000 on account.

1-45
LO 7
 Transaction Analysis
Transaction (7): Softbyte pays the following expenses in cash for
September: store rent $600, salaries of employees $900, and utilities
$200.

1-46
LO 7
 Transaction Analysis
Transaction (8): Softbyte pays its $250 Daily News bill in cash.

1-47
LO 7
 Transaction Analysis
Transaction (9): Softbyte receives $600 in cash from customers who
had been billed for services [in Transaction (6)].

1-48
LO 7
 Transaction Analysis
Transaction (10): Ray Neal withdraws $1,300 in cash from the
business for his personal use. Illustration 1-8
Tabular summary of
Softbyte transactions

Adv

Rent
Sal
UTL

1-49
LO 7
 Financial Statements

Companies prepare four financial statements :

Income Balance
Owner’s Sheet or Statement
Statement
Profit /Loss Equity Statement of of Cash
Statement or Statement Financial Flows
Statement of Position
Financial
Performance

1-50 LO 8 Understand the four financial statements and how they are prepared.
 Net income is needed to determine the
Financial Statements ending balance in owner’s equity.

Single Step Income Statement

(Revenue – Expenses)

1-51
 The ending balance in owner’s equity is
Financial Statements needed in preparing the balance sheet

=
L
+
OE
1-52
 The balance sheet and income statement are
Financial Statements needed to prepare statement of cash flows.

1-53
 Financial Statements

Income Statement
◆ Reports the revenues and expenses for a specific period
of time.

◆ Lists revenues first, followed by expenses.

◆ Shows net income (or net loss).

1-54
 Financial Statements

Owner’s Equity Statement

◆ Reports the changes in owner’s equity for a specific
period of time.

◆ The time period is the same as that covered by the

income statement.

◆ Also called the Retained Earning Statement.

1-55
 Financial Statements

Balance Sheet
◆ Reports the assets, liabilities, and owner’s equity at a
specific date.

◆ Lists assets at the top, followed by liabilities and owner’s

equity.

◆ Total assets must equal total liabilities and owner’s equity.

◆ Is a snapshot of the company’s financial condition at a

specific moment in time (usually the month-end or year-
end).

1-56
 Financial Statements

Statement of Cash Flows

◆ Information for a specific period of time.

◆ Answers the following:

1. Where did cash come from?

2. What was cash used for?

3. What was the change in the

cash balance?

1-57
 Financial Statements Statement of Cash Flows

1-58
 Problem 1.4

1-59
 Solution P-1.4

May 1 Trixie invested $7,000 cash in the business.

Matrix Consulting
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2
3
5
9
12
16
17
20
23
26
29
30

1-60
 Solution P1.4

May 2 Paid $900 for office rent for the month.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3
5
9
12
16
17
20
23
26
29
30

1-61
 Solution P1.4

May 3 Purchased $600 of supplies on account.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5
9
12
16
17
20
23
26
29
30

1-62
 Solution P1.4

May 5 Paid $125 to advertise in the County News.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9
12
16
17
20
23
26
29
30

1-63
 Solution P1.4

May 9 Received $4,000 cash for services performed.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12
16
17
20
23
26
29
30

1-64
 Solution P1.4

May 12 Withdrew $1,000 cash for personal use.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
16
17
20
23
26
29
30

1-65
 Solution P1.4

May 15 Performed $5,400 of services on account.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 (1000) (1000)
15 +5400 +5400
17
20
23
26
29
30

1-66
 Solution P1.4

May 17 Paid $2,500 for employee salaries.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20
23
26
29
30

1-67
 Solution P1.4

May 20 Paid for the supplies purchased on account on May 3.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23
26
29
30

1-68
 Solution P1.4

May 23 Received a cash payment of $4,000 for services performed on account on May 15.
Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23 +4000 -4000
26
29
30

1-69
 Solution P1.4

May 26 Borrowed $5,000 from the bank on a note payable.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23 +4000 -4000
26 +5000 +5000
29
30

1-70
 Solution P1.4

May 29 Purchased equipment for $4,200 on account.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23 +4000 -4000
26 +5000 +5000
29 +4200 +4200
30

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 Solution P1.4

May 30 Paid $275 for utilities.

Matrix Consulting
Transaction Analysis
May 1, 2017
Assets Liabilities Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23 +4000 -4000
26 +5000 +5000
29 +4200 +4200
30 -275 -275

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 Solution P1.4

May 30 Paid $275 for utilities.

Matrix Consulting
Transaction Analysis
May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Notes A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
1 +7000 +7000
2 -900 -900
3 +600 +600
5 -125 -125
9 +4000 +4000
12 -1000 -1000
15 +5400 +5400
17 -2500 -2500
20 -600 -600
23 +4000 -4000
26 +5000 +5000
29 +4200 +4200
30 -275 -275
14600 1400 600 4200 5000 4200 7000 -1000 9400 -3800
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20800 9200 11 600
 Solution P-1.4

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 Solution P-1.4

- Class Work-
Prepare it by yourself

Matrix Consulting
Owners Equity Statement
For the month ended May 31, 2017
Particulars Amount Amount
Beginning O/E @ May 01 0
+ Investment/Capital 7,000
+Net Income/Profit (loss) 5,600
- Drawing (1000)
Ending O/E @ May 31 11,600

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 Solution P-1.4

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 Problem:2

In cash

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 Solution P-1.2
Beginning Balance of August: Cash $5,000, Accounts Receivable $1,500, Supplies
$500, Equipment $6,000, Accounts Payable $4,200, and Owner’s Capital $8,800.
Sue Kojima
Transaction Analysis
For the month of August 31, 2014
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Sl. Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1
2
3
4
5
5
5
6
7
8

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 Solution P-1.2

1. Collected $1,200 of accounts receivable.

Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2
3
4
5
5
5
6
7
8

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 Solution P-1.2

2. Paid $2,800 cash on accounts payable.

Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3
4
5
5
5
6
7
8

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 Solution P-1.2
3. Recognized revenue of $7,500 of which $3,000 is collected in cash and the
balance is due in September.
Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4
5
5
5
6
7
8

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 Solution P-1.2
4. Purchased additional equipment for $2,000, paying $400 in cash and the
balance on account.
Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4 -400 +2000 +1600
5
5
5
6
7
8

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 Solution P-1.2
5. Paid salaries $2,500, rent for August $900, and advertising expenses $400.

Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4 -400 +2000 +1600
5 -2500 -2500
5 -900 -900
5 -400 -400
6
7
8

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 Solution P-1.2

6. Withdrew $700 in cash for personal use.

Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4 -400 +2000 +1600
5 -2500 -2500
5 -900 -900
5 -400 -400
6 -700 -700
7
8

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 Solution P-1.2

7. Received $2,000 from Standard Federal Bank—money borrowed on a note

payable.
Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4 -400 +2000 +1600
5 -2500 -2500
5 -900 -900
5 -400 -400
6 -700 -700
7 +2000 +2000
8

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 Solution P-1.2
8. Incurred utility expenses for month on cash $270.

Sue Kojima
Transaction Analysis
For the month of May 31, 2017
Assets = Liabilities + Owners Equity
Dt. Cash A/C Supplies Equip. Note A/C + - + -
Receivable Payable Payable Capital Drawing Revenues Expenses
BB 5000 1500 500 6000 4200 8800
1 +1200 -1200
2 -2800 -2800
3 +3000 +4500 +7500
4 -400 +2000 +1600
5 -2500 -2500
5 -900 -900
5 -400 -400
6 -700 -700
7 +2000 +2000
8 -270 -270
3230 4800 500 8000 2000 3000 8800 -700 7500 -4070
16530 = 5000 + 11530
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16530 16530
 Solution P-1.4

Sue Kojima
Income Statement
For the month ended August 31, 2014
Particulars Amount Amount
A. Revenues:
Service Revenue 7,500 7,500
B. Expenses(-)
Salary Expense 2500
Rent Expense 900
Advertisement 400
Utilities 270 4,070
Net Income (A-B) 3,430

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 Solution P-1.4

Sue Kojima
Owners Equity Statement
For the month ended August 31, 2017

Particulars Amount Amount

Beginning O/E @ August 01 8,800
+ Investment/Capital 0
+Net Income/Profit (loss) 3,430
- Drawing (700)
Ending O/E @ August 31 11,530

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 Solution P-1.4

Sue Kojima
Balance Sheet
For the month ended August 31, 2014
Particulars Amount Amount
Assets:
Cash 3,230
A/C Receivable 4,800
Supplies 500
Equipment 8,000 16,530

Liabilities:
A/C Payable 3000
Notes Payable 2000 5,000
Owners Capital at August 11,530
31st
Liabilities + Owners Equity 16,530

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 Assignment No:1 (Problem 1)
Last date of Submission: 0211.2020 (Monday)
Submission Medium: Google Class Room

1-90
 Assignment No:1 (Problem 2)

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