ASSIGNMENT # 1

Jiya Rani
# 101476161
ACCT1036: Principles of Accounting
Prof. Sam Alagurajah
February 22, 2024
 Answer # 1
a) ABC Corporation
ASSETS = LIABILITIES + EQUITY

Trans. Cash Accounts Supplie Computer Accounts SamA. SamA. Expenses Revenues
No. Receivable s Equipment Payable Investment Withdrawals
1. $5,000 $5,000
2. $3,000 $3,000
3. -$400 $400
4. -$550 $550
5. $700 $700
6. $600 $600
7. $1,200 $1,200
8. -$600 -$600
9. $600 -$600
10 -$450 $450
11. -$300 $300
Totals $4,000 $600 $400 $3,450 $0 $8,000 -$300 -$1,150 $1,900

b) ABC’s profit for Jan. 2024 (Net Income) =

= Total Revenue – Total Expenses

= 1900 – 1150
= $750
c) ABC’s equity at the end of Jan 2024=

= Investments – Withdrawals + Net Income

= $8000 - $300 + $750
= $8450
d) Accounting Equation: Assets = Liabilities + Equity

Assets = Cash + Accounts Receivable + Supplies + Computer Equipment

= $4000 + $600 + $400 + $3450
= $8450
Liabilities = Accounts Payable
= $0
Equity = SamA. Investment – SamA. Withdrawals + Revenues – Expenses
= $8000 - $300 + $1900 - $1150
= $8450
Hence,
Assets = Liabilities + Equity
 $8450 = $0 + $8450
Answer # 2

SAMTANA CORP.
Balance Sheet
December 31, 2023
Assets Liabilities
Cash $12,000 Accounts Payable $9,000
Building $46,000
Land $52,000
Office Equipment $4,000 Owner's Equity

Accounts receivable $15,000 Samtana, Capital $120,000

Total assets $129,000 Total liabilities $129,000

&Equity

Answer # 3
JOURNAL ENTERIES
Transaction 1
Debit Credit
Cash $35000
Investment $35000

Transaction 2 Debit Credit

Office supplies $400
Accounts Payable $400

Transaction 3
Debit Credit
Office equipment $6000
Cash $2500
Accounts Payable $3500
Transaction 4
 Debit Credit
Accounts Receivable $4000
Service revenue $4000

Transaction 5
Debit Credit
Rent expense $700
Cash $700

Transaction 6
Debit Credit
Accounts Payable $200
Cash $200

Transaction 7
Debit Credit
Advertising expense $500
Accounts Payable $500
Transaction 8
Debit Credit
Salaries expense $2200
Cash $2200

Transaction 9
Debit Credit
Drawings $1200
Cash $1200
Transaction 10
 Debit Credit
Cash $3000
Accounts Receivable $3000

Answer # 4
Accrual Basis Accounting: It is an accounting method where revenues are recognized when they
are earned (regardless of when the money is received) and expenses are recognized when they
are incurred (regardless of when they are paid). It is based on the time-period assumption.
Under this accounting, revenues are recognized when the product is delivered or the service is
completed, not when the payment is received. Similarly, expenses are recognized when they are
incurred, not when they are paid.
Difference between Cash basis accounting and accrual basis accounting:
Basis Cash basis accounting Accrual basis accounting
Meaning Revenue recognized after payment Revenue is recognized once “earned”
in cash has been received. (i.e. product/service was delivered)
Transactions It records only cash transactions. It records both cash and credit
transactions.
Uses It is rarely used. It is widely used.

GAAP Doesn’t approve this method. Approved this method.

Suitability Small businesses. Large organizations.
Taxation Doesn’t recognize this method of More appropriate for tax filing.
accounting.

Example:
I would like to take an example of my uncle’s electronic store named “Bansal electronics” who
uses cash basis accounting for their daily transactions.
Revenue Recognition:
If Bansal electronics bills a client $2000 for the services, it rendered on January 25, 2024, and
receives payment on February 10, 2024. It records the sale on the cash receipt date, which is
February 10,2024.
Expense Recognition:
Similarly, if Bansal Electronics receives a $1000 invoice from a vendor on January 20,2024 and
pays the bill on February 21,2024. It records the expense on the day of the payment, which is
February 21.
Thus, cash basis records transactions only when cash is exchanged.
Answer # 5
a) In this case, the job was completed from June 15th to July 15th.
Let’s assume that the work was done evenly across the month June and July.
June: The job started on June 15 and completed on July 15. Therefore, half of the total job
cost: $4000/2 = $2000 should be recognized in June.
July: The half completed in July, so remaining $2000 out of $4000 should be recognized
in July.
September: no work was done this month, so no revenue should be recognized in
September.
The payments of $1000 in June, $2600 in July and $400 in September received by Sam
company are simply cash inflows.
Hence, the revenue Sam company should accrue is:
June = $2000
July = $2000
September = $0
b) In this case, the insurance company has the obligation to provide insurance coverage for a
year, and it earns the revenue evenly over that period using accrual basis accounting.
The total revenue from the insurance policy = $4200
The coverage period = 12 months
Revenue earned each month = Total revenue/Number of months
= 4200/12
= $350
Thus, the insurance company should accrue $350 of revenue each month from January to
December.