Assuming The Role Of An Accountant: Your New Client Susie Ma

Assuming the Role Of An Accountant Your New Client Suzie Maye Needs H

Assuming the role of an accountant, your new client Suzie Maye needs help in setting up basic accounting practices for her business. You begin by showing her how to set up a transaction analysis based on the accounting equation of Assets = Liabilities + Owner’s Equity. You show Suzie how to enter the various assets, liabilities and owner’s equity into the transaction analysis template demonstrating the balance based on the equation. This will help Suzie understand that through this process every financial transaction that occurs in her business must be reconciled on each side of the equation. Please record the following transactions using transaction analysis.

Please use this template to complete this assignment. 1-May Owner, Suzie Maye, invested $7,000 in her business, Matrix Consulting. 2-May Company paid monthly rent, $900. 3-May Company bought supplies on account, $600. 5-May Company paid monthly advertising, $125. 9-May Company performed services, $4,000. 12-May Owner, Suzie Maye, withdrew $1,000 for personal use. 15-May Company performed services on account for $5,400. 17-May Company paid monthly salaries, $2,500. 20-May Company made a payment on account, $600. 23-May Company received $4,000 from a customer on account. 26-May Company borrowed $5,000 from local bank. 29-May Company bought equipment on account for $4,200. 30-May Company paid monthly utilities, $275.

Paper For Above instruction

Introduction

Accounting is fundamental to the effective management and financial understanding of a business. It allows owners, managers, and stakeholders to assess financial health and make informed decisions. Establishing a basic transaction analysis based on the accounting equation (Assets = Liabilities + Owner’s Equity) provides a solid foundation for recording and understanding business transactions. The following analysis exemplifies how each transaction impacts the core components of a company’s financial position, fostering clarity and systematic recording practices essential for accurate financial reporting.

Transaction 1: May 1 – Owner Investment

Suzie Maye invested $7,000 into her business, Matrix Consulting. This transaction increases assets (cash) and owner’s equity (owner’s capital). The transaction analysis is as follows:

  • Assets: Increase (Cash +$7,000)
  • Liabilities: No change
  • Owner’s Equity: Increase (Owner’s Capital +$7,000)

This transaction keeps the accounting equation balanced: Assets increase by $7,000, and owner’s equity increases by the same amount, with liabilities unaffected.

Transaction 2: May 2 – Rent Payment

The company pays $900 for monthly rent. This is an expense paid in cash, decreasing assets but not affecting liabilities or owner’s equity directly at this point (expenses reduce net income, which reduces owner’s equity over time). The analysis:

  • Assets: Decrease (Cash -$900)
  • Liabilities: No change
  • Owner’s Equity: Decrease (Retained Earnings decrease due to expenses)

While this reduces owner's equity through expenses, for simplicity, in initial analysis, the impact is recorded as a reduction in assets balanced by a corresponding decrease in owner’s equity via retained earnings.

Transaction 3: May 3 – Supplies Purchased on Account

The business buys supplies costing $600 on account (on credit). This increases supplies (assets) and accounts payable (liability):

  • Assets: Increase (Supplies +$600)
  • Liabilities: Increase (Accounts Payable +$600)
  • Owner’s Equity: No change

This preserves the balance as the increase in assets is offset by an increase in liabilities.

Transaction 4: May 5 – Advertising Payment

The company pays $125 for advertising. This reduces cash (asset) and decreases owner’s equity via advertising expense:

  • Assets: Decrease (Cash -$125)
  • Liabilities: No change
  • Owner’s Equity: Decrease (Advertising Expense -$125)

Expenses like advertising reduce owner’s equity over time through the income statement effect.

Transaction 5: May 9 – Services Performed

The company provides services earning $4,000 cash. This increases assets and owner’s equity via revenue:

  • Assets: Increase (Cash +$4,000)
  • Liabilities: No change
  • Owner’s Equity: Increase (Revenue +$4,000)

Revenue increases owner’s equity directly, reflecting income earned through service provision.

Transaction 6: May 12 – Owner Withdrawal

Suzie Maye withdraws $1,000 for personal use, reducing assets and owner’s equity:

  • Assets: Decrease (Cash -$1,000)
  • Liabilities: No change
  • Owner’s Equity: Decrease (Owner’s Drawings -$1,000)

This transaction is a reduction of owner’s equity as funds are withdrawn for personal purposes.

Transaction 7: May 15 – Services on Account

The business performs services worth $5,400 on account (credit). Assets increase (accounts receivable), and owner’s equity increases via revenue:

  • Assets: Increase (Accounts Receivable +$5,400)
  • Liabilities: No change
  • Owner’s Equity: Increase (Revenue +$5,400)

This reflects earned revenue not yet received in cash, impacting receivables and income.

Transaction 8: May 17 – Salaries Paid

The company pays $2,500 in salaries. Cash decreases, and this expense reduces owner’s equity:

  • Assets: Decrease (Cash -$2,500)
  • Liabilities: No change
  • Owner’s Equity: Decrease (Salaries Expense -$2,500)

Salaries are operating expenses that impact net income and overall equity.

Transaction 9: May 20 – Payment on Account

The company pays $600 towards a previous account payable. Assets (cash) decrease, liabilities decrease:

  • Assets: Decrease (Cash -$600)
  • Liabilities: Decrease (Accounts Payable -$600)
  • Owner’s Equity: No change

This payment reduces liabilities while assets decrease correspondingly.

Transaction 10: May 23 – Customer Payment on Account

The business receives $4,000 from a customer on account. Cash increases, and accounts receivable decreases:

  • Assets: Increase (Cash +$4,000), Decrease (Accounts Receivable -$4,000)
  • Liabilities: No change
  • Owner’s Equity: No change

This transaction involves receivables conversion to cash, with no immediate effect on owner’s equity.

Transaction 11: May 26 – Loan from Bank

The company borrows $5,000 from the bank, increasing cash and notes payable (liability):

  • Assets: Increase (Cash +$5,000)
  • Liabilities: Increase (Notes Payable +$5,000)
  • Owner’s Equity: No change

This inflow of funds increases liabilities and assets equally, maintaining the balance.

Transaction 12: May 29 – Equipment Purchase on Account

The company acquires equipment costing $4,200 on credit. Assets (Equipment) increase, liabilities (Accounts Payable) increase:

  • Assets: Increase (Equipment +$4,200)
  • Liabilities: Increase (Accounts Payable +$4,200)
  • Owner’s Equity: No change

This transaction records asset acquisition financed by credit, aligning increases in assets and liabilities.

Transaction 13: May 30 – Utilities Paid

The business pays $275 in utilities. Cash decreases, utilities expense reduces owner’s equity:

  • Assets: Decrease (Cash -$275)
  • Liabilities: No change
  • Owner’s Equity: Decrease (Utilities Expense -$275)

Utilities expense impacts income and owner’s equity similarly to other expenses.

Conclusion

This transaction analysis demonstrates how each economic event affects the financial position of Matrix Consulting. Equal changes between assets and liabilities or owner’s equity ensure the accounting equation remains balanced. Consistent application of this systematic approach facilitates accurate bookkeeping, financial reporting, and insights for business decision-making. As Suzie Maye’s business evolves, maintaining meticulous transaction records analyzed through the accounting equation will underpin sustainable growth and financial clarity.

References

  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2020). Financial Accounting (11th ed.). Wiley.
  • Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management. Cengage Learning.
  • Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2018). Introduction to Financial Accounting. Pearson.
  • Revsine, L., Collins, W. W., Johnson, W. B., & Mittelstaedt, F. H. (2019). Financial Reporting & Analysis (8th ed.). Pearson.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2021). Financial Accounting Theory and Analysis. Wiley.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2019). Financial Statement Analysis. McGraw-Hill Education.
  • Leone, A., & Leone, J. (2017). Accounting Principles. McGraw-Hill Education.
  • Gibson, C. H. (2018). Financial Reporting & Analysis: Using Financial Accounting Information. Cengage Learning.
  • Healy, P. M., & Palepu, K. G. (2019). Business Analysis & Valuation. Cengage Learning.
  • Anton, H., Roelle, A., & Neyhart, J. (2020). Managerial Accounting. McGraw-Hill Education.

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