On September 1 of the current year, Maria Edsall established a business to manag

Question

On September 1 of the current year, Maria Edsall established a business to manage rental property. She completed the following transactions during September:

a. opened a business bank account with a deposit of $40,000. from personal funds.
b.purchased supplies on account, $2,200.
c. received cash from fees earned for managing rental property, $6,000
d. paid rent on office and equipment, 2,700.
e. paid creditors on account, $1,000.
f. billed customers for fees for managing property, $5,000
g. paid automobile expenses, $300.
h. paid ofifce salaries, $1,900.
i. determined that the cost of supplies on hand was $1,300., therefore, the cost of supplies used was $900.
j. Withdrew cash for personal use, $1,800.
Question:

Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

Assets =liabiliyies+ owner's equity
________________________________________________________________________________________

Accounts Accounts Maria' Maria Fees Rent Salaries Auto Misc
Cash+Receivables+Supplies= Payable + Capital - Drawing + Earned -Expense - Expense - Expens






2. Briefly explain why the owner's investment and revenues increased owner's equity, while withdrawals and expenses decreased owner's equity.

Explanation / Answer

Owner’s equity is the right of owners to the assets of the business. These rights are increased by owner’s investments and revenues and decreased by owner’s withdrawals and expenses. In a sole proprietorship or partnership, owner's equity equals the total net investment in the business plus the net income or loss generated during the business's life. Net investment equals the sum of all investment in the business by the owner or owners minus withdrawals made by the owner or owners. The owner's investment is recorded in the owner's capital account, and any withdrawals are recorded in a separate owner's drawing account. Net income or net loss equals the company's revenues less its expenses. Revenues are inflows of money or other assets received from customers in exchange for goods or services. Expenses are the costs incurred to generate those revenues. Capital investments and revenues increase owner's equity, while expenses and owner withdrawals (drawings) decrease owner's equity. In a partnership, there are separate capital and drawing accounts for each partner.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.