- •Levon Gzokyan ● Business & English ● Unit 4
- •Financial statements
- •Balance sheet
- •Transaction 2, Loan from bank.
- •Transaction 3, Acquire store equipment for cash.
- •Transaction 4, Purchase inventory for cash
- •Transaction 5, Purchase inventory on credit
- •Transaction 6, Purchase inventory for cash plus credit
- •Transaction 7, Sale of asset for cash
- •Transaction 8, Return of inventory to supplier
- •Transaction 9, Payment to creditor
- •Transaction 10, Purchase car (to be analyzed entirely by you)
- •Transaction 11, Sales on open account, January 17
- •Transaction 12, Collection of accounts receivable, February 3
- •Cash flow statement
- •Which of the following investing activities increase/decrease cash:
- •See ‘Battle Point’ in unit 3 for instructions.
Transaction 2, Loan from bank.
On January 2, 20_ _, Book Corner borrows from a bank, signing a promissory note for $50,000. This loan increases the asset, Cash, and the liability, Note payable, by the same amount. As always the sums of the individual account balances in each side of the equation are equal. Note that we will start analyzing the next transaction with the balance at the bottom.
Assets |
= |
Liabilities |
+ |
Owners' Equity |
||
|
Cash |
|
Note payable |
|
Eugene, Capital |
|
(1) |
30,000 |
= |
|
|
30,000 |
|
(2) |
50,000 |
= |
50,000 |
|
|
|
Bal. |
80,000 |
= |
|
80,000 |
|
|
Transaction 3, Acquire store equipment for cash.
On January 3, 20_ _, Book Corner acquires additional store equipment for $15,000 cash. Store equipment is a long-lived asset – an asset that the company expects to provide services for more than 1 year.
Assets |
= |
Liabilities |
+ |
Owners' Equity |
||||
|
Cash |
Store Equipment |
|
Note Payable |
Eugene, Capital |
|||
Bal. |
80,000 |
|
= |
50,000 |
|
30,000 |
||
(3) |
-15,000 |
15,000 |
= |
|
|
|
||
Bal. |
65,000 |
15,000 |
= |
50,000 |
|
30,000 |
||
80,000 |
|
80,000 |
(3) We begin our new transaction analysis with the balance left over from the previous transaction (Bal. 80,000). This transaction, the cash purchase of store equipment, increases one asset, Store Equipment, and decreases another asset, Cash, by the same amount. The form of the assets change, but the total amount remains unchanged. The right side is completely unchanged.
(4) Book Corner can prepare a balance sheet at any point in time. The balance sheet for the next day after starting up the business will look like this:
Book Corner |
|
|||||
Balance Sheet |
|
|||||
January 3, 20_ _ |
|
|||||
Assets |
|
Liabilities and Owners' Equity |
||||
Cash |
$65,000 |
|
Liabilities (note payable) |
$50,000 |
||
Store equipment |
15,000 |
|
Eugene, capital |
30,000 |
||
Total assets |
$80,000 |
|
Total liabilities and owners' equity |
$80,000 |
‘PUZZLE-3’ POINT
►Consider how to analyze each of the following additional transactions following the examples above: