Accounting Solution 2.2 (Accounting for Accruals)
Analysis of transactions is presented below:
1) Capital acquisition
Assets increase (Cash) and equity increases (Contributed Capital) - asset
source transaction.
2) Cash payment for expenses
Assets decrease (Cash) and equity decreases (Retained Earnings) - asset
use transaction.
3) Recorded revenue on account
Assets increase (Account Receivable) and equity increases (Retained Earnings)
- asset source transaction.
4) Accrual expenses
Liabilities (Accounts Payable) increase and equity decreases (Retained
Earnings) - claims exchange transaction.
5) Settlement of accounts payable
Assets decrease (Cash) and liabilities decrease (Accounts Payable) - asset
use transaction.
6) Cash distribution
Assets decrease (Cash) and equity decreases (Retained Earnings) - asset
use transaction.
7) Cash collected for accounts receivable
One asset increases (Cash) and another asset decreases (Accounts receivable)
at the same time - asset exchange transaction.
8) Cash from rendering services
Assets (Cash) and equity increase (Retained Earnings) - asset source transaction.
The effects of transaction on the accounting equation are shown:
| Event |
Assets |
= |
Liab. |
+ |
Equity |
Rev. |
- |
Exp. |
= |
Net |
Cash Flow |
|||||
| 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 |
| 2 |
(500) |
+ |
n/a |
= |
n/a |
+ |
n/a |
+ |
(500) |
n/a |
- |
500 |
= |
(500) |
(500) |
OA |
| 3 |
n/a |
+ |
2,800 |
= |
n/a |
+ |
n/a |
+ |
2,800 |
2,800 |
- |
n/a |
= |
2,800 |
n/a |
|
| 4 |
n/a |
+ |
n/a |
= |
1,900 |
+ |
n/a |
+ |
(1,900) |
n/a |
- |
1,900 |
= |
(1,900) |
n/a |
|
| 5 |
(1,900) |
+ |
n/a |
= |
(1,900) |
+ |
n/a |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
(1,900) |
OA |
| 6 |
(1,000) |
+ |
n/a |
= |
n/a |
+ |
n/a |
+ |
(1,000) |
n/a |
- |
n/a |
= |
n/a |
(1,000) |
FA |
| 7 |
500 |
+ |
(500) |
= |
n/a |
+ |
n/a |
+ |
n/a |
n/a |
- |
n/a |
= |
n/a |
500 |
OA |
| 8 |
1,200 |
+ |
n/a |
= |
n/a |
+ |
n/a |
+ |
1,200 |
1,200 |
- |
n/a |
= |
1,200 |
1,200 |
OA |
| Totals |
$2,000 |
+ |
$2,300 |
= |
$ 0 |
+ |
$3,700 |
+ |
$600 |
$4,000 |
- |
2,400 |
= |
$1,600 |
$2,000 |
|
Location