Question

Zen began a new consulting firm on January 5. Following is a financial summary, including balances, for each of the company’s first five transactions (using the accounting equation form).

Assets = Liabilities + Equity

Transaction Cash + Accounts + Office + Office = Accounts + Common + Revenues Receivable Supplies Furniture Payable Stock

4. 30,000 + 6,000 + 3,000 + 8,000 = 1,000 + 40,000 + 6,000

Identify the explanation from a through j below that best describes each transaction 1 through 5 above and enter it in the blank space in front of each numbered transaction.

a. The company purchased office furniture for \(8,000 cash.

b. The company received \)40,000 cash from a bank loan.

c. The owner invested \(1,000 cash in the business in exchange for its common stock.

d. The owner invested \)40,000 cash in the business in exchange for its common stock.

e. The company purchased office supplies for \(3,000 by paying \)2,000 cash and putting \(1,000 on credit.

f. The company billed a customer \)6,000 for services provided.

g. The company purchased office furniture worth \(8,000 on credit.

h. The company provided services for \)1,000 cash.

i. The company sold office supplies for \(3,000 and received \)2,000 cash and \(1,000 on credit.

j. The company provided services for \)6,000 cashAccounts receivables are the amount owed to the company and the correct explanation will be Explanation F

Short answer

Accounts receivables are the amount owed to the company and the correct explanation will be Explanation F

Step-by-step solution

Definition of Accounts receivables

Account receivables are defined as the amount owed to the company by some other party in exchange for goods or services.

Explanation for the correct option

In the accounting equation, the accounts receivables have increased by the amount of $6,000, and the revenues section is also increased, which means that the company has provided some consulting services on credit and generated revenue of $6,000. Hence, the correct collection will be explanation F