Question

Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “−” and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (−) along with dollar amounts. The first transaction is completed as an example.

Required a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income

1 Owner invests \(800 cash in business in exchange for stock +800 +800 +800

2 Purchases \)100 of supplies on credit

3 Buys equipment for \(400 cash

4 Provides services for \)900 cash

5 Pays \(400 cash for rent incurred

6 Incurs \)200 utilities costs on credit

7 Pays \(300 cash for wages incurred

8 Pays \)50 cash for dividends

9 Provides \(600 services on credit

10 Collects \)600 cash on accounts receivable

Short answer

The balance sheet shows the financial position of the business and the required table for the balance sheet and income statement is prepared.

Step-by-step solution

Definition of Balance Sheet

The balance sheet is the financial statement that reports all the assets, liabilities, and equity of the business which represents the financial health of the business.

Preparation of the statement

	Balance Sheet	Income statement
Transactions	Total assets ($)	Total Liabilities ($)	Total Equity ($)	Net Income ($)
1	+800		+800
2	+100	+100
3	+400 -400
4	+900			+900
5	-400			-400
6		+200		-200
7	-300			-300
8	-50		-50
9	+600			+600
10	+600 -600