Serial Problem - 10 Ezto.mhecloud/Hmtpx

Serial Problem - 10 ezto.mhecloud.mcgraw-hill.com/hm.tpx?_=0._

On October 1, 2011, Santana Rey launched a computer services company, Business Solutions, that is organized as a corporation and provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company's first set of financial statements on December 31, 2011. The company made several financial transactions during October, including investments, purchases, billing, cash collections, wages, and dividends. You are asked to record these transactions in the accounting equation, showing the balances after each transaction, indicating increases or decreases with appropriate signs, and leaving no cells blank.

Paper For Above instruction

The assignment requires constructing the effects of each financial transaction on the basic accounting equation, which is Assets = Liabilities + Equity. The transactions span from October 1st to October 31st and include investments, purchases, sales, collections, payments for expenses, and dividends.

Introduction

The accounting equation forms the foundation of double-entry bookkeeping, illustrating the relationship between a company's assets, liabilities, and equity. Recording transactions accurately within this framework is vital for preparing financial statements that reflect the company's financial position. This exercise involves analyzing each of the specified transactions and determining their impact on each component of the accounting equation, updating balances accordingly.

Analysis of Transactions

October 1: Investment by Santana Rey

The owner invests cash, a computer system, and office equipment, increasing assets and equity. The journal entry reflects an increase in cash ($50,000), computer system ($23,000), and office equipment ($8,500), with a corresponding increase in common stock under equity.

Purchases and Payments: October 3 and 6

The purchase of computer supplies on credit increases assets (computer supplies) and liabilities (accounts payable). Payment of supplies reduces cash and liabilities accordingly. Billing customers increases accounts receivable and revenues, impacting accounts and equity.

Wages, Repairs, Advertisements, and Collections

Hiring and wages payable impact current liabilities and expenses, decreasing assets when paid. Expenses like repair, advertising, and wages reduce assets and equity. Cash collections from customers increase cash assets and decrease accounts receivable.

Additional Transactions

Billing for services, receipt of partial payments, payment of dividends, and other expenses similarly impact the components of the accounting equation, shifting balances across assets, liabilities, and equity. Each transaction must be analyzed individually to determine its effect, ensuring the equation remains balanced after every entry.

Process Documentation

This process involves systematically analyzing each transaction to determine its effect on assets, liabilities, and equity. Standard procedures include identifying accounts involved, classifying increases and decreases, and updating balances accordingly. For complex entries, reference to accounting principles ensures accurate classification. Maintaining detailed records helps ensure consistency and accuracy in financial reporting.

Conclusion

Recording financial transactions within the framework of the accounting equation enhances understanding of the company's financial position. Proper classification and systematic updates enable accurate financial statement preparation, essential for informed decision-making by stakeholders.

References

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