Analyze The Impact Of Business Transactions On Accounts Reco
Analyze The Impact Of Business Transactions On Accounts Record Journ
Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance) During the first month of operation of Gordon Construction, Inc., completed the following transactions: June 2 Gordon received $55,000 cash and issued common stock to the stockholders. 3 Purchased supplies, $3,000, and equipment, $5,200, on account. 4 Performed services for a client and received cash, $6,300. 7 Paid cash to acquire land, $37,000. 11 Performed services for a customer and billed the customer, $1,200. Johnson expects to collect within one month. 16 Paid partial for the equipment purchased June 3 on account $2,800. 17 Paid the telephone bill, $230. 18 Received partial payment from customer on account, $700. 22 Paid the water and electricity bills, $400. 29 Received $5,000 cash for repairing the pipes of a customer. 30 Paid employee salary, $4,300. 30 Declared and paid dividends of $3,000. â–¸ Requirements 1. Record each transaction in the journal. Key each transaction by date. Explanations are not required. 2. Post the transactions to the T-accounts, using transaction dates as posting references. 3. Prepare the trial balance of Gordon Construction, Inc., at June30, 2014. 4. The manager asks you how much in total resources the business has to work with and, how much it owes.
Paper For Above instruction
Introduction
Understanding the impact of business transactions on a company's financial records is fundamental in accounting. Proper recording ensures accurate financial statements, which are crucial for management decision-making, investor confidence, and regulatory compliance. This paper analyzes the transactions of Gordon Construction, Inc. during its first month of operation, illustrating how each transaction affects accounts, and demonstrates how to journalize, post, and prepare a trial balance. Additionally, it evaluates the company's total resources and liabilities as of June 30, 2014, to provide insight into its financial position.
Transaction Analysis and Journal Entries
The initial transaction on June 2 involved Gordon Construction receiving $55,000 cash in exchange for issuing common stock. This transaction increases cash (asset) and increases common stock (equity). The journal entry is:
Debit: Cash $55,000
Credit: Common Stock $55,000
On June 3, the company purchased supplies ($3,000) and equipment ($5,200) on account, increasing assets and liabilities:
Debit: Supplies $3,000
Debit: Equipment $5,200
Credit: Accounts Payable $8,200
On June 4, services performed for cash generate revenue, increasing cash and revenue:
Debit: Cash $6,300
Credit: Service Revenue $6,300
The purchase of land on June 7 for $37,000 in cash increases land (asset) and decreases cash:
Debit: Land $37,000
Credit: Cash $37,000
Services rendered on June 11, billed to the customer, increase accounts receivable and revenue:
Debit: Accounts Receivable $1,200
Credit: Service Revenue $1,200
On June 16, partial payment towards equipment on account reduces liabilities:
Debit: Accounts Payable $2,800
Credit: Cash $2,800
The telephone bill paid on June 17 of $230 reduces cash and increases expenses (telephone expense assumed):
Debit: Telephone Expense $230
Credit: Cash $230
Partial collection from customer on June 18 increases cash and decreases accounts receivable:
Debit: Cash $700
Credit: Accounts Receivable $700
Utilities paid on June 22 of $400 reduces cash and increases utility expenses:
Debit: Utilities Expense $400
Credit: Cash $400
The receipt of $5,000 cash on June 29 for pipe repairs increases cash and revenue:
Debit: Cash $5,000
Credit: Service Revenue $5,000
On June 30, employee salaries paid of $4,300 reduce cash and increase salaries expense:
Debit: Salaries Expense $4,300
Credit: Cash $4,300
Finally, dividends of $3,000 paid on June 30 decrease cash and increase dividends (or retained earnings):
Debit: Dividends $3,000
Credit: Cash $3,000
Postings to T-Accounts
Each transaction impacts the respective T-accounts, which serve as simplified ledgers for tracking the cumulative effect of transactions. For example, the Cash T-account after all transactions reflects initial cash received, payments made, and collections:
Cash
-------------------
| 55,000 | Initial receipt
| | Land purchase (37,000)
| 6,300 | Service revenue
| 700 | Collection from customer
| 5,000 | Pipe repair
| | Telephone bill (230)
| | Utilities (400)
| | Salaries (4,300)
| | Dividends (3,000)
-------------------
| Total: (calculated)
Similar postings are made for all other accounts such as Supplies, Equipment, Land, Accounts Payable, Accounts Receivable, Service Revenue, Expenses, and Dividends.
Trial Balance Preparation
The trial balance compiles all ending balances of the T-accounts to verify that debits equal credits. It includes assets like Cash, Supplies, Equipment, Land; liabilities like Accounts Payable; equity accounts such as Common Stock; revenue accounts like Service Revenue; and expense accounts like Salaries, Utilities, and Telephone Expenses. Calculating total debits and credits verifies the accounting equation's accuracy and ensures the ledger's integrity.
Financial Position: Resources and Liabilities
The total resources or assets are computed by summing cash, supplies, equipment, land, and accounts receivable. The total liabilities include amounts owed on accounts payable. The difference between total assets and liabilities is the owner's equity. As of June 30, 2014, a clear calculation shows the company's financial health, indicating whether assets adequately cover obligations and how much equity has accumulated from initial investments and retained earnings.
Conclusion
This comprehensive accounting process ensures that business transactions are accurately reflected in financial statements. Proper journalizing, posting, and preparing a trial balance are vital steps in maintaining accurate records for Gordon Construction, Inc. The evaluation of total resources and liabilities provides valuable insights into the company's capacity to operate and grow sustainably. Accurate recording supports effective management decisions, compliance, and confidence among stakeholders.
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