Question

Below is the trial balance for Sally's Salon, Inc., in the space before each account, write whether it is an asset account (A), a liability account (L), an Equity account (E), a Revenue account (R), or an Expense account). Then, using the appropriate accounts, prepare an income statement and a balance sheet. Be sure to include proper headings. You will probably need a separate sheet of paper for these. Sally's Salon, Inc. Trial Balance December 31 _Cash $7,500 Accounts receivable 475 Beauty supplies 2,500 Beauty shop equipment 17,000 Accounts payable $745 Common stock 1,000 Retained earnings Dividends Revenue earned 72,000 Beauty supplies expense 3,425 Rent expense 6,000 Wages expense 22,000 $94,900 594,900 21,155 36,000 Totals

Can somebody help me with this?

Answer 1

The categorization will be as follows:

	Category of Account
Cash	Asset
Accounts Receivable	Asset
Beauty Supplies	Asset
Beauty Ship Equipment	Asset
Accounts Payable	Liability
Common Stock	Equity
Retained Earnings	Equity
Dividends	Equity
Revenue earned	Revenue
Beauty Supplies expense	Expense
Rent expense	Expense
Wages expense	Expense

The financial statements will be prepared in the following manner:

Sally's Salon Inc.
Income Statement
For the year ended Dec 31
Revenues
Revenues Earned	$   72,000
Total Revenues		$   72,000
Expenses
Beauty Supplies Expense	$     3,425
Rent expense	$     6,000
Wages expense	$   22,000
Total Expenses		$   31,425
Net Income		$   40,575

Sally's Salon Inc.
Balance Sheet
As at Dec 31
ASSETS
Current Assets
Cash	$     7,500
Accounts Receivables	$         475
Beauty Supplies	$     2,500
Total Current Assets		$   10,475
Property, Plant & Equipment
Beauty Shop Equipment		$   17,000
TOTAL ASSETS		$   27,475
LIABILITIES
Current Liabilities
Accounts Payable	$         745
Total Current Liabilities		$         745
TOTAL LIABILITIES		$         745
EQUITY
Common Stock	$     1,000
Retained Earnings*	$   25,730
TOTAL EQUITY		$   26,730
TOTAL LIABILITIES & EQUITY		$   27,475

Notes

Revenues and Expenses will come in Income Statement. Income Statement is prepared for a time range.

Assets, Liabilities and Equity will come in the Balance Sheet. Balance Sheet is prepared as on a particular date.

Retained Earnings = beginning balance + net income - dividends = 21155+40575-36000