Question

Required information [The following information applies to the questions displayed below.] Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations. May 1 G. Gram invested $43,500 cash in the company. 1 The company rented a furnished office and paid $2,400 cash for May’s rent. 3 The company purchased $1,890 of office equipment on credit. 5 The company paid $800 cash for this month’s cleaning services. 8 The company provided consulting services for a client and immediately collected $5,200 cash. 12 The company provided $2,500 of consulting services for a client on credit. 15 The company paid $780 cash for an assistant’s salary for the first half of this month. 20 The company received $2,500 cash payment for the services provided on May 12. 22 The company provided $3,900 of consulting services on credit. 25 The company received $3,900 cash payment for the services provided on May 22. 26 The company paid $1,890 cash for the office equipment purchased on May 3. 27 The company purchased $90 of office equipment on credit. 28 The company paid $780 cash for an assistant’s salary for the second half of this month. 30 The company paid $350 cash for this month’s telephone bill. 30 The company paid $270 cash for this month’s utilities. 31 G. Gram withdrew $1,500 cash from the company for personal use. 2-a. Prepare income statement for May. 2-b. Prepare statement of owner's equity for May. 2-c. Prepare Balance Sheet for May 31. 3. Prepare statement of cash flows for May.

Answer 1

Working Office Accounts Cleaning Consultancy Accounts Equipment Payable Expenses Revenue Receivable Telephone Utilities Expenses Expenses Rent Capital 43,500 Salary Cash 43,500 -2,400 2,400 1,890 1,890 800 -800 5,200 5,200 2,500 2,500 780 -780 2,500 May Transaction \Effect to Ledger 1 Capital Invested 1 Rent paid 3 Acquired office Equipment on account 5 Cleaning services paid 8 Consultancy service provided 12 Consultancy service provided on credit 15 Salary for first half month 20 Received for service provided on credit 22 Consultancy service provided on credit 25 Received for service provided on credit 26 Paid for equipment purchased 27 Acquired office Equipment on account 28 Salary for first half month 30 Telephone for the month paid 30 Utilities expenses for the month paid 31 Personal expenses Total -2,500 3,900 3,900 -3,900 3,900 -1,890 -1,890 90 90 780 350 -780 -350 -270 -1,500 46,330 270 -1,500 42,000 2,400 1,980 90 800 11,600 1,560 350 270 (2a) The Gram Co. Income Statement (For the month of May) Particulars Consultancy Revenue $ 11,600 Less: Expenses Rent Salary Telephone Expenses Utilities Expenses Cleaning Expenses Net Income 2,400 1,560 350 270 800 6,220 (2b) The Gram Co. Statement of Owner's Equity Particulars Capital $ Retained Earning $ - 43,500 Capital - Opening Balance Add: Capital Introduced Add: Profir for the year Less: Drawing Capital - Closing Balance 6,220 -1,500 42,000 6,220 (2c) The Gram Co. Balance Sheet (As on end of May) Particulars $ Assets Current Assets Cash 46,330 Non Current Assets Office Equipment 1,980 Total Assets 48,310 Current Liabilities Accounts Payable 90 Owner's Equity Capital Retained Earning 42,000 6,220 Total Equity & Liabilities 48,310 (20) The Gram Co. Statement of Cash Flow (for the month of May) Particulars $ Cashflow from Operating activities Net profit Change in working capital - Accounts Payable Cashflow from Operating activities 6,220 90 6,310 Cashflow from Investing activities Office Equipment purchased -1,980 Cashflow from Financing activities Capital received (net of drawing) 42,000 46,330 Total of Operating, Investing and Financing Opening cash and cash equivalents Closing cash and cash equivalents 46,330