| Journalizing transactions, posting to accounts in four-column format, and preparing a trial balance [45-60 min] The trial balance of Sam Mitchell, CPA, is dated January 31, 2012: SAM MITCHELL, CPA Trial Balance January 31, 2012 Account No. Cash Debit S 7,000 Account Credit 11 12 Accounts receivable 10,500 Supplies Land Accounts payable Mitchell, capital Mitchell, drawing Service revenue Salary expense Rent expense 13 600 14 17,000 21 $ 4,700 31 30,400 32 41 51 52 Total 35,100 35,100 During February, Mitchell or his business completed the following transactions: Feb 4 Collected $4,000 cash from a client on account. 8 Performed tax services for a client on account, $4,600. 13 Paid business debt on account, $2,400. 18 Purchased office supplies on account, $900. 20 Mitchell withdrew cash of $2,200. 21 Mitchell paid for a deck for his private residence using personal funds, S8,000. 22 Received $2,300 cash for consulting work just completed. 27 Paid office rent, $500. 29 Paid employee salary, $1,600. ments 1. Record the February transactions in the jourmal. Include an explanation for each entry. 2. Post the transactions to four-column accounts in the ledger, using dates, account numbers, journal references, and posting references. Open the ledger accounts listed in the trial balance, together with their balances at January 31. 3. Prepare the trial balance of Sam Mitchell, CPA, at February 29, 2012.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![Journalizing transactions, posting to accounts in four-column format,
and preparing a trial balance [45-60 min]
The trial balance of Sam Mitchell, CPA, is dated January 31, 2012:
SAM MITCHEL, СРА
Trial Balance
January 31, 2012
Debit
$ 7,000
Account No.
Account
Credit
11
Cash
12
Accounts receivable
10,500
13
Supplies
600
14
Land
17,000
Accounts payable
Mitchell, capital
Mitchell, drawing
21
4,700
31
30,400
32
41
Service revenue
51
Salary expense
52
Rent expense
35,100 S 35,100
Total
During February, Mitchell or his business completed the following transactions:
Feb 4 Collected $4,000 cash from a client on
account.
8 Performed tax services for a client on account,
$4,600.
13 Paid business debt on account, $2,400.
18 Purchased office supplies on account, $900.
20 Mitchell withdrew cash of $2,200.
21 Mitchell paid for a deck for his private residence
using personal funds, $8,000.
22 Received $2,300 cash for consulting work just
completed.
27 Paid office rent, $500.
29 Paid employee salary, $1,600.
Requirements
1. Record the February transactions in the journal. Include an explanation for each
entry.
2. Post the transactions to four-column accounts in the ledger, using dates,
account numbers, journal references, and posting references. Open the ledger
accounts listed in the trial balance, together with their balances at January 31.
3. Prepare the trial balance of Sam Mitchell, CPA, at February 29, 2012.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe024b6f7-9698-4a19-a872-c3aea4f85f48%2F41399ef0-02b9-4c75-9070-b4e591541e5f%2F1t4hf6k_processed.png&w=3840&q=75)
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