The Expanded Accounting Equation – An Interactive Tutorial

This tutorial includes a quiz which requires use of a provided Microsoft Excel template.

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Launch Presentation

The Problem Statement for the Expanded Accounting Equation

Richard Campbell purchased and opened a web design company in Avondale, AZ, on November 1, 2017. On November 1, the beginning balance sheet showed Cash $7,000, Accounts Receivable $2,600, Supplies $600, Office Equipment $7,500, Accounts Payable $5,700, and Campbell, Capital $12,000. During November, the following transactions occurred.

1 Collected $1,500 cash on accounts receivable.
2 Paid $2,750 of accounts payable.
3 Earned revenue of $11,500, of which $4,000 is paid in cash and the balance is due in December.
4 Purchased additional office equipment for $4,200, paying $500 in cash and the balance on account.
5 Received $2,500 from AZ Bank – money borrowed on a note payable.
6 Incurred utilities expense for month on account $450.
7 Withdrew $1,800 cash for personal use.
8 Paid salaries $3,300 and rent for November $1,600, as well as advertising expense $500.

 

 

Instructions

(a) Prepare a tabular analysis of the November transactions beginning with November 1 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Office Equipment = Notes Payable + Accounts Payable + Campbell, Capital –  Campbell, Drawings + Revenues – Expenses.

 

(b) Prepare an income statement for November, an owner’s equity statement for November, and a balance sheet at November 30.