1 Accounting Concepts and Procedures: An Introduction ANSWERS TO DISCUSSION QUESTIONS AND CRITICAL THINKING/ETHICAL CASE 10 11 12 13 14 15 The functions of accounting are to analyze, record, classify, summarize, report and interpret information Sole proprietorship—1 owner, unlimited liability; easy to form Partnership—2 or more owners; unlimited liability, easy to form Corporation—1 or many shareholders; limited liability; more difficult to form Service, merchandising, or manufacturing Bookkeeping is the recording function of the accounting process Accounting is the reporting and interpreting of that information The three elements of the basic accounting equation are assets, liabilities, owner’s equity Capital is the owner’s current investment or equity in the assets of a business It is one subdivision of owner’s equity True The sum of the left side of the equation must equal the sum of the right side of the equation False It is the income statement which tells how well the company has performed False Revenue is a subdivision of owner’s equity Owner’s equity is subdivided into Capital, Withdrawals, Revenue, and Expenses False It is a non-business expense; a subdivision of owner’s equity Reject As expenses increase, owner’s equity decreases Revenue less Expenses; an income statement shows performance—profit or loss for the period False It calculates ending capital The question in this case is whether Paul should be allowed to “pad” his expense account with an additional $100 of expenses I feel that Paul should only be allowed to charge those items that are business related Paul’s argument that he is entitled to an additional $100 is not a valid assumption However, he should be allocated money for any business expenses during the weekend © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1-1 1/15/14 5:32 PM SOLUTIONS TO CLASSROOM DEMONSTRATION EXERCISES a b c d e f A A L A OE A $16,000 ($4,000 + $12,000) b d f g J Penny, Capital J Penny, Withdrawals Advertising Expense Taxi Fees Earned a b c Equities Assets Accounts Payable c d Accounts Payable Grooming Fees Earned a b I S a b d a b c d e f g h IS BS BS BS IS IS OE BS a b c d OE BS BS IS SOLUTIONS TO EXERCISES—SET A EXERCISE 1-1A a $15,000 ($19,000 - $4,000) b $15,000 ($ 6,000 + $9,000) c $ 6,000 ($10,000 - $4,000) EXERCISE 1-2A Cash Assets + Equipment a + $8,000 b - $600 c = Liabilities + Owner’s Equity + $8,000 + $600 + $900 + $900 EXERCISE 1-3A RANGE CO CLEANERS BALANCE SHEET NOVEMBER 30, 2016 ASSETS Cash Equipment Total Assets 1-2A LIABILITIES AND OWNER’S EQUITY $5 0 0 0 Liabilities 0 00 Accounts Payable Owner’s Equity B Range, Capital Total Liabilities and $5 0 0 Owner’s Equity $1 0 0 43 0 0 $5 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1/15/14 5:32 PM EXERCISE 1-4A BELL’S COMPUTER COMPANY Assets Cash a Accounts + Receivable + Computer Equipment = Liabilities + = Accounts Payable + + $60,000 + $7,000 - $200 d + $14,000 e B Bell, Capital - B Bell, Withdrawals + Revenue - Expenses + $60,000 b c Owner’s Equity + $7,000 + $200 + $14,000 + $30,000 + $30,000 f - $4,000 + $4,000 g - $1,500 + $1,500 ENDING BALANCE $68,300 + $30,000 + $7,000 = + $7,000 + $105,300 = $105,300 + $60,000 - $200 + $44,000 - $5,500 Remember, as withdrawals or expenses increase, the end result is to reduce owner’s equity EXERCISE 1-5A (a) FRENCH REALTY INCOME STATEMENT FOR THE MONTH ENDED JUNE 30, 2016 Revenue: Professional Fees Operating Expenses: Salaries Expense Utilities Expense Rent Expense Total Operating Expenses Net Income $2 0 0 $ 0 00 00 0 00 00 $1 0 (b) FRENCH REALTY STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED JUNE 30, 2016 S French, Capital, June 1, 2016 Net Income for June Less: Withdrawals for June Increase in Capital S French, Capital, June 30, 2016 $8 0 0 $1 0 00 0 00 $9 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1-3A 1/15/14 5:32 PM SOLUTIONS TO EXERCISES—SET A, Cont (c) FRENCH REALTY BALANCE SHEET JUNE 30, 2016 ASSETS LIABILITIES AND OWNER’S EQUITY Cash Accounts Receivable Office Equipment $3 0 Liabilities 00 Accounts Payable 0 0 Owner’s Equity S French, Capital Total Liabilities $11 0 0 and Owner’s Equity Total Assets $2 0 0 0 00 $11 0 0 SOLUTIONS TO EXERCISES—SET B EXERCISE 1-1B a $9,000 ($15,000 - $6,000) b $19,000 ($8,000 + $11,000) c $9,000 ($14,000 - $5,000) EXERCISE 1-2B Cash Assets + Equipment = a + $12,000 b - $2,000 + $2,000 c + $3,500 Liabilities + Owner’s Equity + $12,000 + $3,500 EXERCISE 1-3B RANGE CO CLEANERS BALANCE SHEET NOVEMBER 30, 2016 ASSETS Cash Equipment Total Assets 1-4B LIABILITIES AND OWNER’S EQUITY $2 0 0 0 Liabilities 16 0 0 Accounts Payable Owner’s Equity B Range, Capital Total Liabilities and $3 0 0 Owner’s Equity $1 0 0 24 0 0 $3 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1/15/14 5:32 PM EXERCISE 1-4B BELL’S COMPUTER COMPANY Assets Cash a Accounts + Receivable + Computer Equipment = Liabilities + = Accounts Payable + + $40,000 + $8,000 - $150 d + $12,000 e B Bell, Capital - B Bell, Withdrawals + Revenue - Expenses + $40,000 b c Owner’s Equity + $8,000 + $150 + $12,000 + $25,000 + $25,000 f - $3,000 + $3,000 g - $900 + $900 ENDING BALANCE $47,950 + $25,000 + $8,000 = + $8,000 + $80,950 = $80,950 + $40,000 - $150 + $37,000 - $3,900 Remember, as withdrawals or expenses increase, the end result is to reduce owner’s equity EXERCISE 1-5B (a) FRENCH REALTY INCOME STATEMENT FOR THE MONTH ENDED JUNE 30, 2016 Revenue: Professional Fees Operating Expenses: Salaries Expense Utilities Expense Rent Expense Total Operating Expenses Net Income $5 0 0 $ 0 00 00 00 2 00 $3 0 (b) FRENCH REALTY STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED JUNE 30, 2016 S French, Capital, June 1, 2016 Net Income for June Less: Withdrawals for June Increase in Capital S French, Capital, June 30, 2016 $9 0 0 $3 0 00 00 $11 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1-5B 1/15/14 5:32 PM SOLUTIONS TO EXERCISES—SET B, Cont (c) FRENCH REALTY BALANCE SHEET JUNE 30, 2016 ASSETS Cash Accounts Receivable Office Equipment LIABILITIES AND OWNER’S EQUITY $4 0 Liabilities 0 00 Accounts Payable 0 0 Owner’s Equity S French, Capital Total Liabilities $15 0 and Owner’s Equity Total Assets $4 0 0 11 0 $15 0 PROBLEM 1A-1 MIA’S NAIL SPA Assets Cash Transaction a BALANCE Transaction b BALANCE Transaction c BALANCE Transaction d ENDING BALANCE + Equipment = Liabilities + Owner’s Equity = Accounts Payable + Mia Annabelle, Capital + $20,000 + $20,000 20,000 = -4,000 16,000 + 4,000 = +6,000 16,000 + 10,000 20,000 +$6,000 = -1,000 $15,000 20,000 +$4,000 6,000 + 20,000 + $20,000 -1,000 + $10,000 = $5,000 $25,000 = $25,000 PROBLEM 1A-2 SEE’S INTERNET SERVICE BALANCE SHEET SEPTEMBER 30, 2017 ASSETS Assets: Cash Equipment Building Total Assets 1-6B LIABILITIES AND OWNER’S EQUITY Liabilities: $18 0 0 Accounts Payable 14 0 0 0 0 0 Owner’s Equity: B See, Capital $52 0 0 Total Liabilities and Owner’s Equity $15 0 0 37 0 0 $52 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1/15/14 5:32 PM PROBLEM 1A-3 RICK FOX DESKTOP PUBLISHING SERVICE Assets Cash a BALANCE b BALANCE c BALANCE d BALANCE e BALANCE f BALANCE g BALANCE h ENDING BALANCE Accounts + Receivable + Office Equipment = Liabilities + = Accounts Payable + +$12,000 Owner’s Equity R Fox, Capital - R Fox, Withdrawals + Revenue Expenses +$12,000 12,000 = + $4,000 12,000 12,000 + $4,000 + 4,000 = 4,000 + 12,000 + 4,000 = 4,000 + 12,000 + +500 + $500 12,500 500 + $2,100 12,500 - +2,100 + 2,100 + 4,000 = 4,000 + 12,000 + 2,600 + 2,100 + 4,000 = 4,000 + 12,000 + 2,600 - 11,640 + 2,100 + 4,000 = 4,000 + 12,000 + 2,600 - 860 11,640 + 2,100 + 4,000 = 4,900 + 12,000 + 2,600 - 1,760 + $2,600 - $1,760 - 650 11,850 +$650 - 210 +210 +900 +900 - 400 $11,240 650 $400 + $2,100 + $4,000 = $4,900 $17,340 = $17,340 + $12,000 - $400 PROBLEM 1A-4 (a) WEST’S STENCILLING SERVICE INCOME STATEMENT FOR THE MONTH ENDED JUNE 30, 2017 Revenue: Stenciling Fees Operating Expenses: Advertising Expense Repair Expense Travel Expense Supplies Expense Rent Expense Total Operating Expenses Net Income $3 0 0 $ 1 2 5 0 00 00 00 00 00 00 $2 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1-7 1/15/14 5:32 PM PROBLEM 1A-4., Cont (b) WEST’S STENCILLING SERVICE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED JUNE 30, 2017 J West, Capital, June 1, 2017 Net Income for June Less: Withdrawals for June Increase in Capital J West, Capital, June 30, 2017 $1 0 0 $2 0 0 00 00 $3 0 (c) WEST’S STENCILLING SERVICE BALANCE SHEET JUNE 30, 2017 ASSETS Assets: Cash Accounts Receivable Equipment Total Assets 1-8 LIABILITIES AND OWNER’S EQUITY Liabilities: $2 0 0 Accounts Payable 0 00 0 Owner’s Equity J West, Capital 00 Total Liabilities and Owner’s Equity $3 0 $3 0 $ 00 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 1/15/14 5:32 PM PROBLEM 1A-5 MARTIN’S CATERING SERVICE Assets Cash 10/28 BALANCE 10/29 BALANCE 10/30 BALANCE 10/31 BALANCE 11/1 BALANCE 11/4 BALANCE 11/8 BALANCE 11/11 BALANCE 11/15 BALANCE 11/18 BALANCE 11/19 BALANCE 11/25 BALANCE 11/28 BALANCE 11/29 ENDING BALANCE Accounts + Receivable + Equipment = Liabilities + = Accounts Jill Martin, Payable + Capital +$8,000 Owner’s Equity - Jill Martin, Withdrawals + Catering Revenue - +$8,000 8,000 - 900 = 8,000 = 8,000 +$900 7,100 + 7,100 + 900 2,700 = + 2,700 = + 2,700 + +1,800 +$1,800 + 8,000 800 + 8,000 = 800 + 8,000 + 2,900 2,700 = 800 + 8,000 + 2,900 + 2,700 = 800 + 8,000 + -1,000 1,800 - 1,000 6,100 +2,900 +$2,900 9,000 -720 +$720 8,280 +$300 8,280 + +100 8,380 300 - 720 3,200 - 720 720 +300 - 100 + 200 + 2,700 = 800 + 8,000 + 3,200 - + 200 + 2,700 = 800 + 8,000 + 3,200 - 795 + 200 + 2,700 = 800 + 8,000 - 90 + 3,200 - 795 10,015 + 200 + 2,700 = 800 + 8,000 - 90 + 5,000 - 795 10,015 + 200 + 3,100 = 1,200 + 8,000 - 90 + 5,000 - 795 10,015 + 200 + 3,100 = 1,800 + 8,000 - 90 + 5,000 - 1,395 - 75 8,305 +75 - 90 8,215 +90 +1,800 +1,800 +400 +400 +600 +600 - 400 $9,615 +400 + $200 + $3,100 = $1,800 $12,915 = $12,915 + $8,000 - $90 + $5,000 - © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd Expenses $1,795 1-9 1/15/14 5:32 PM SolutionManual for College Accounting 12th Canadian Edition by Slater PROBLEM 1A-5., Cont MARTIN’S CATERING SERVICE BALANCE SHEET OCTOBER 31, 2016 ASSETS Assets: Cash Equipment Total Assets LIABILITIES AND OWNER’S EQUITY $6 0 0 0 00 $8 0 0 Liabilities: Accounts Payable $ 0 00 Owner’s Equity: Jill Martin, Capital 0 00 Total Liabilities and Owner’s Equity $8 0 0 MARTIN’S CATERING SERVICE INCOME STATEMENT FOR THE MONTH ENDING NOVEMBER 30, 2016 Revenue: Catering Fees Operating Expenses: Salaries Expense Telephone Expense Rent Expense Supplies Expense Total Operating Expenses Net Income 1-10 $5 0 0 $ 7 0 0 00 00 00 00 00 $3 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 10 1/15/14 5:32 PM PROBLEM 1B-4 Cont (b) WEST’S STENCILLING SERVICE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED JUNE 30, 2017 J West, Capital, June 1, 2017 Net Income for June Less: Withdrawals for June Decrease in Capital J West, June 30, 2017 $3 0 $ 00 00 00 $3 0 (c) WEST’S STENCILLING SERVICE BALANCE SHEET JUNE 30, 2017 ASSETS Assets: Cash Accounts Receivable Equipment Total Assets 1-14 LIABILITIES AND OWNER’S EQUITY Liabilities: $2 0 Accounts Payable 1 00 0 Owner’s Equity J West, Capital Total Liabilities and $3 0 Owner’s Equity $ 00 00 $3 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 14 1/15/14 5:32 PM PROBLEM 1B-5 MARTIN’S CATERING SERVICE Assets Cash 10/28 BALANCE 10/29 BALANCE 10/30 BALANCE 10/31 BALANCE 11/1 BALANCE 11/4 BALANCE 11/8 BALANCE 11/11 BALANCE 11/15 BALANCE 11/18 BALANCE 11/19 BALANCE 11/25 BALANCE 11/28 BALANCE 11/29 ENDING BALANCE Accounts + Receivable + Equipment = Liabilities + = Accounts Jill Martin, Payable + Capital +$9,500 Owner’s Equity - Jill Martin, Withdrawals + Catering Revenue - 9,500 = +$1,200 9,500 + - 1,500 1,200 9,500 +$1,200 = 1,200 + 9,500 = 1,200 + 9,500 + 9,500 +1,500 8,000 + 2,700 -600 - 600 7,400 + 2,700 = 600 +2,400 +$2,400 9,800 + 2,700 = 600 + 9,500 + 2,400 - 580 +$580 9,220 + 2,700 = 600 + 9,500 + +$4,500 9,220 + +2,000 11,220 4,500 2,400 - 580 580 +4,500 + 2,700 = 600 + 9,500 + 6,900 - + 2,700 = 600 + 9,500 + 6,900 - - 2,000 + 2,500 - 95 11,125 + 2,500 + 2,700 = 600 + 9,500 + + 2,500 + 2,700 = 600 + 9,500 - 825 - + 6,900 - 675 + 2,500 + 2,700 = + 2,500 + 3,200 600 675 + 9,500 - 825 + 8,700 - + 9,500 - 825 + 8,700 - +500 = 1,100 +750 12,100 + 2,500 + 3,200 = 1,850 + 9,500 - 825 + 8,700 - 1,425 +600 + $2,500 + $3,200 = $1,850 $17,200 = $17,200 + $9,500 - $825 + $8,700 - © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 15 675 +750 - 600 $11,500 675 - +1,800 +500 12,100 6,900 +825 +1,800 12,100 580 +95 -825 10,300 Expenses +$9,500 $2,025 1-15 1/15/14 5:32 PM PROBLEM 1B-5., Cont MARTIN’S CATERING SERVICE BALANCE SHEET OCTOBER 31, 2016 ASSETS Assets: Cash Equipment Total Assets LIABILITIES AND OWNER’S EQUITY $7 0 0 0 00 $10 0 0 Liabilities: Accounts Payable $ 0 00 Owner’s Equity: Jill Martin, Capital 0 00 Total Liabilities and Owner’s Equity $10 0 0 MARTIN’S CATERING SERVICE INCOME STATEMENT FOR THE MONTH ENDING NOVEMBER 30, 2016 Revenue: Catering Fees Operating Expenses: Salaries Expense Telephone Expense Rent Expense Supplies Expense Total Operating Expenses Net Income 1-16 $8 0 0 $ 0 0 00 00 00 00 2 00 $6 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_ 01.indd 16 M01_SLAT7156_12_ISM_C01.indd 1/15/14 5:32 PM PROBLEM 1B-5., Cont MARTIN’S CATERING SERVICE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED NOVEMBER 30, 2016 Jill Martin, Capital, November 1, 2016 Net Income for November Less: Withdrawals for November Increase in Capital Jill Martin, Capital, November 30, 2016 $9 0 0 $6 0 00 00 $1 5 0 MARTIN’S CATERING SERVICE BALANCE SHEET NOVEMBER 30, 2016 ASSETS Assets: Cash Accounts Receivable Equipment Total Assets LIABILITIES AND OWNER’S EQUITY Liabilities: $11 0 0 Accounts Payable 0 00 0 0 Owner’s Equity: Jill Martin, Capital $17 0 0 Total Liabilities and Owner’s Equity $1 0 15 0 $1 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 17 1-17 1/15/14 5:32 PM PROBLEM 1C-1 RJ GRAPHICS Assets Cash TRANSACTION A BALANCE TRANSACTION B BALANCE TRANSACTION C BALANCE TRANSACTION D ENDING BALANCE Computer Equipment + + Software = Liabilities + Owner’s Equity = Accounts Payable + Ruth Jones Capital + $10,500 + $10,500 $10,500 = + $4,500 10,500 + 4,500 = -2,500 8,000 4,500 + 10,500 -2,500 + 4,500 -3,800 $4,200 $10,500 + $4,500 = 2,000 + 10,500 + $3,800 = $2,000 + $10,500 $12,500 = $12,500 + $3,800 + $4,500 + PROBLEM 1C-2 LOH’S DATABASE SERVICE BALANCE SHEET APRIL 30, 2016 ASSETS Assets: Cash Equipment Building Total Assets 1-18 LIABILITIES AND OWNER’S EQUITY Liabilities: $2 0 0 Accounts Payable 26 0 0 0 0 Owner’s Equity: Lewis Loh, Capital $8 0 0 Total Liabilities and Owner’s Equity $34 0 0 49 0 0 $8 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 18 1/15/14 5:32 PM PROBLEM 1C-3 LEROY’S TRAINING SERVICES Assets Cash A BALANCE B BALANCE C BALANCE D BALANCE E BALANCE F BALANCE G BALANCE H BALANCE I ENDING BALANCE Accounts + Receivable + Office Equipment = Liabilities + = Accounts L Greene, Payable + Capital +$9,000 Owner’s Equity - L Greene, Withdrawals + Revenue - +$9,000 9,000 = +$4,250 9,000 9,000 $4,250 + 4,250 = 4,250 + 9,000 + 4,250 = 4,250 + 9,000 + 2,350 + 4,250 = 4,250 + 9,000 + 2,350 +2,350 +$2,350 11,350 - 800 +$800 10,550 +$3,650 10,550 Expenses - 800 +3,650 + 3,650 + 4,250 = 4,250 + 9,000 + 6,000 - 800 + 3,650 + 4,250 = 4,250 + 9,000 + 6,000 - 1,400 8,950 + 3,650 + 4,250 = 4,250 + 9,000 - 1,000 + 6,000 - 1,400 8,950 + 3,650 + 4,250 = 4,650 + 9,000 - 1,000 + 6,000 - 1,800 - 600 9,950 +600 - 1,000 + $1,000 +400 +400 - 192 $8,758 192 + $3,650 + $4,250 = $4,650 $16,658 = $16,658 + $9,000 - $1,000 + $6,000 - $1,992 PROBLEM 1C-4 (a) JENNIFER’S FASHION SERVICE INCOME STATEMENT FOR THE MONTH ENDED JULY 31, 2016 Revenue: Consulting Fees Operating Expenses: Advertising Expense Repair Expense Travel Expense Supplies Expense Rent Expense Office Expense Total Operating Expenses Net Income $4 0 $ 6 7 00 00 00 00 00 00 00 $1 2 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 19 1-19 1/15/14 5:32 PM PROBLEM 1C-4., Cont (b) JENNIFER’S FASHION SERVICE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED JULY 31, 2016 Jennifer Pace, Capital, July 1, 2016 Net Income for July Less: Withdrawals for July Increase in Capital Jennifer Pace, Capital, July 31, 2016 $6 0 $1 2 0 00 00 $6 0 (c) JENNIFER’S FASHION SERVICE BALANCE SHEET JULY 31, 2016 ASSETS Assets: Cash Accounts Receivable Equipment Total Assets 1-20 LIABILITIES AND OWNER’S EQUITY Liabilities: $1 0 Accounts Payable 00 0 Owner’s Equity Jennifer Pace, Capital $8 7 0 Total Liabilities and Owner’s Equity $1 0 00 $8 7 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 20 1/15/14 5:32 PM PROBLEM 1C-5 FIRST CITY SURVEYING SERVICE Assets Cash 04/23 BALANCE 04/26 BALANCE 04/29 BALANCE 04/30 BALANCE 05/02 BALANCE 05/03 BALANCE 05/10 BALANCE 05/13 BALANCE 05/14 BALANCE 05/17 BALANCE 05/21 BALANCE 05/24 BALANCE 05/27 BALANCE 05/28 BALANCE 05/31 ENDING BALANCE Accounts + Receivable + Surveying Equipment = Liabilities + = Accounts H McGraw Payable + Capital - $17,000 Owner’s Equity H McGraw, Withdrawals + Surveying Revenue - $17,000 17,000 = +$4,750 17,000 + - 2,895 4,750 17,000 +$4,750 = 4,750 + 17,000 4,750 + 17,000 +2,895 14,105 + 7,645 = + 7,645 = 2,375 + 17,000 + 7,645 = 2,375 + 17,000 + 2,350 + 7,645 = 2,375 + 17,000 + 2,350 + 7,645 = 2,375 + 17,000 + -2,375 -2,375 11,730 +2,350 +$2,350 14,080 -975 +$975 13,105 +$4,950 13,105 + +2,500 15,605 4,950 - 975 7,300 - 975 +4,950 - 2,500 + 2,450 + 7,645 = 2,375 + 17,000 + 7,300 - 975 + 2,450 + 7,645 = 2,375 + 17,000 + 7,300 - 1,079 + 2,450 + 7,645 = 2,375 + 17,000 - 1,043 + 7,300 - 1,079 16,283 + 2,450 + 7,645 = 2,375 + 17,000 - 1,043 + 9,125 - 1,079 16,283 + 2,450 + 10,060 = 4,790 + 17,000 - 1,043 + 9,125 - 1,079 + 2,450 + 10,060 = 4,790 + 17,000 - 1,043 + 9,125 - 1,904 + 2,450 + 10,060 = 4,790 + 17,000 - 1,043 + 9,125 - 2,150 - 104 15,501 +104 - 1,043 14,458 +$1,043 +1,825 +1,825 +2,415 +2,415 -825 15,458 +825 - 246 15,212 +246 +410 $15,212 + $2,450 + $10,060 = $5,200 $27,722 = $27,722 +410 + $17,000 - $1,043 + $9,125 - © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 21 Expenses $2,560 1-21 1/15/14 5:32 PM PROBLEM 1C-5., Cont FIRST CITY SURVEYING SERVICE BALANCE SHEET APRIL 30, 2016 ASSETS Assets: Cash Surveying Equipment Total Assets LIABILITIES AND OWNER’S EQUITY $11 0 00 $19 0 Liabilities: Accounts Payable $2 0 Owner’s Equity: Howard McGraw, Capital 17 0 0 Total Liabilities and Owner’s Equity $1 0 FIRST CITY SURVEYING SERVICE INCOME STATEMENT FOR THE MONTH ENDING MAY 31, 2016 Revenue: Surveying Revenue Operating Expenses: Salaries Expense Telephone Expense Rent Expense Supplies Expense Advertising Expense Total Operating Expenses Net Income 1-22 $9 0 $ 5 00 00 00 00 00 00 $6 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 22 1/15/14 5:32 PM PROBLEM 1C-5., Cont FIRST CITY SURVEYING SERVICE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED MAY 31, 2016 Howard McGraw, Capital, May 1, 2016 Net Income for May Less: Withdrawals for May Increase in Capital Howard McGraw, Capital, May 31, 2016 $17 0 0 $6 0 00 5 2 00 $22 2 0 FIRST CITY SURVEYING SERVICE BALANCE SHEET MAY 31, 2016 ASSETS Assets: Cash Accounts Receivable Equipment Total Assets LIABILITIES AND OWNER’S EQUITY Liabilities: $15 2 0 Accounts Payable 00 0 0 Owner’s Equity: Howard McGraw, Capital $27 2 0 Total Liabilities and Owner’s Equity $5 0 0 22 2 0 $2 7 2 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 23 1-23 1/15/14 5:32 PM SOLUTION TO ON-THE-JOB TRAINING, # T-1 Roger’s Window Washing Company Income Statement For The Year Ended December 31, 2015 Revenue: Window Cleaning Operating Expenses: Salaries Expense Supplies Expense Interest Expense Advertising Expense Total Operating Expenses Net Income Insights $11 0 +2 0 0 $14 0 $14 0 $6 8 0 00 00 00 00 $5 0 +1 0 0 $6 8 0 00 $5 0 Advice to Roger: In the long run, a formal bookkeeping and accounting system may prove less costly than creating statements from informal records—and provide more reliance for Canada Revenue Agency as well. SOLUTION TO ON-THE-JOB TRAINING, #T-2 LUNE CO BALANCE SHEET DECEMBER 31, 2016 ASSETS Assets: Cash Accounts Receivable Land Building Desks Auto Total Assets LIABILITIES AND OWNER’S EQUITY $10 104 72 44 14 3 6 5 Liabilities: 00 Notes Payable 00 Accounts Payable 00 Total Liabilities 00 0 Owner’s Equity: 00 J Lune, Capital $252 0 Total Liabilities and Owner’s Equity $75 0 127 0 $202 0 50 0 $252 0 Slowe does not seem to understand the basic accounting equation, the classification of accounts, or the double entry accounting system which would keep all of the accounts in balance (including the Capital account) If she stays in the position of bookkeeper, it is likely that the accounting records will not be accurate 1-24 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 24 1/15/14 5:32 PM LUNE CO BALANCE SHEET REVISED JANUARY 4, 2017 ASSETS LIABILITIES AND OWNER’S EQUITY Assets: Cash Accounts Receivable Land Building Desks Auto Total Assets $28 104 72 44 14 20 3 6 5 Liabilities: 00 Notes Payable 00 Accounts Payable 00 Total Liabilities 00 0 Owner’s Equity: 00 J Lune, Capital $284 0 $79 0 127 0 $2 0 78 0 Total Liabilities and Owner’s Equity $284 0 Insight Cash 10,016 20,000 2,000 Desks Auto J Lune Notes Payable 6,825 14,268 50,049 75,328 8,000 6,000 28,000 4,000 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 25 1-25 1/15/14 5:32 PM CONTINUING PROBLEM 1., PRECISION COMPUTER CENTRE Assets Cash a BALANCE b BALANCE c BALANCE d BALANCE + Supplies + = Liabilities + Computer Shop Office Accounts T Freedman, T Freedman, Service Equipment + Equipment = Payable + Capital - Withdrawals + Revenue +$4,500 4,500 = 4,500 = 4,500 +1,200 3,300 + 1,200 -600 +600 2,700 + 1,200 + 600 = +250 2,700 + - Expenses +$4,500 -1,200 e 250 + 4,500 + 250 1,200 + 600 = 250 + 4,500 +400 Rent -400 BALANCE f BALANCE g BALANCE 2,300 + 250 + 1,200 + 600 = 250 + 4,500 250 + 1,200 + 600 = 250 + 4,500 + 250 + 1,200 + 600 = 250 + 4,500 + +250 2,550 + +200 2,750 + - 400 - 400 - 400 +250 250 +200 h 450 +85 Utilities + 85 BALANCE i BALANCE j ENDING BALANCE 1-26 Owner’s Equity 2,750 + 250 + 1,200 + 600 = 335 + 4,500 + 1,200 3,950 + 250 + 1,200 + 600 = 335 + 4,500 -100 $3,850 + 450 - 485 1,200 + 1,650 - 485 + $1,650 - $485 +100 $250 + $1,200 + $600 = $335 $5,900 = $5,900 + $4,500 - $100 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 26 1/15/14 5:32 PM CONTINUING PROBLEM, Cont PRECISION COMPUTER CENTRE INCOME STATEMENT FOR THE MONTH ENDED MAY 31, 2016 Revenue: Service Revenue $1 0 Operating Expenses: Rent Expense Utilities Expense Total Operating Expenses $ 0 00 00 00 Net Income $1 0 PRECISION COMPUTER CENTRE STATEMENT OF OWNER’S EQUITY FOR THE MONTH ENDED MAY 31, 2016 T Freedman, Capital Contribution, May 1, 2016 Plus: Net Income for May Less: Withdrawals for May Increase in Capital T Freedman, Capital, May 31, 2016 $4 0 0 $1 0 0 00 00 $5 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 27 1-27 1/15/14 5:32 PM CONTINUING PROBLEM, Cont PRECISION COMPUTER CENTRE BALANCE SHEET MAY 31, 2016 ASSETS LIABILITIES AND OWNER’S EQUITY Assets: Cash Supplies Computer Shop Equipment Office Equipment $3 2 Total Assets $5 0 0 1-28 5 0 0 0 Liabilities: 00 Accounts Payable 00 0 Owner’s Equity 00 T Freedman, Capital Total Liabilities and Owner’s Equity $ 3 00 5 00 $5 0 0 © 2015 Pearson Canada All Rights Reserved M01_SLAT7156_12_ISM_C01.indd 28 1/15/14 5:32 PM