Question

The following table shows the effects of five transactions (1 through 5) on the assets, liabilities, and equity of Mulan’s Boutique.

Assets = Liabilities + Equity

Cash + Accounts + Office + Land = Accounts + Common + Revenues Receivable Supplies Payable Stock

\( 21,000 + \) 0 + \(3,000 + \)19,000 = \( 0 + \)43,000 + \( 0

3. + 1,900 + 1,900

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 \)1,000 of office supplies on credit.

b. The company collected \(1,900 cash from an account receivable.

c. The company sold land for \)4,000 cash.

d. The company paid \(1,000 cash in dividends to shareholders.

e. The company purchased office supplies for \)1,000 cash.

f. The company purchased land for \(4,000 cash.

g. The company billed a client \)1,900 for services provided.

h. The company paid \(1,000 cash toward an account payable.

i. The owner invested \)1,900 cash in the business in exchange for its common stock.

j. The company sold office supplies for $1,900 on credit.

Short answer

Revenue is the amount received by providing goods or services and the correct explanation will be G.

Step-by-step solution

Definition of Revenue

The revenue is defined as any amount received by the business from the sale of goods or services and it can be in the form of cash or credit.

Explanation for the correct answer

In the accounting equation, in the asset section, the accounts receivables are increased by the amount of $1,900 and the revenues have increased with the same amount of $1,900. So, this shows the company has made revenue on credit. Hence, the correct explanation will be G.