PRACTICE CH 1

1)

Mark decides to open a cleaning and laundry service near the local
college campus that will operate as a sole proprietorship. Analyze the
following transactions for the month of June in terms of their effect on the
basic accounting equation. Record each transaction by increasing (+) or
decreasing () the dollar amount of each item affected. Indicate the new
balance of each item after a transaction is recorded.

Transactions
(1)

mark invests $20,000 in cash to start a cleaning and laundry business on

June 1.

(2)

Purchased equipment for $5,000 paying $3,000 in cash and pay the rest later
.

(3)

Purchased supplies for $1,200 cash.

(4)

Received a bill from College News for $300 for advertising in the campus
newspaper.

(5)

Cash receipts from customers for cleaning and laundry amounted to $2,400.

(6)

Paid salaries of $600 to student workers.

(7)

Billed the Soccer Team $450 for cleaning and laundry services.

(8)

Paid $300 to College News for advertising that was previously billed in
Transaction 4.

(9)

mark withdrew $1,500 from the business for personal use .

(10)

utility expenses of $500 pay later .

2) Analyze the transactions of a business organized as a proprietorship

described below and indicate their effect on the basic accounting equation.
Use a plus sign (+) to indicate an increase and a minus sign () to indicate a
decrease.

Assets
Equity

Liabilities + Owner's

1. Received cash for services performed._________

_________

_________

2. Purchased office equipment on account._______

_________

_________

3. Paid employees' salaries.

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

4. Received cash from customer in payment

on account.
5. Paid telephone bill for the month.

6. Paid for office equipment purchased in

transaction 2.
7. Purchased office supplies on credit.
8. Owner withdrew cash for personal
expenses.
9. Obtained a loan from the bank.

3) On April Sara started a travel agency the following transaction during the
month

12345678-

Invested 15000 cash to start the business

Paid 600 cash for rent
Purchase 3000 equipment in cash
Paid 700 advertising expense on account
Paid 800 cash for office supply
Performed service for 10000 , 3000 cash and 7000 on account
Withdraw 500 cash for personal use
Paid 2500 cash salary for employee

4) faisal started his own consulting company , the following transaction occurred
during the month of may 2014
1- he invested 7000 cash in the business
2- paid 900 for rent
3- purchased 600 supplies on account
4- paid 125 to advertise in city news
5- received 4000 cash for service performed
6- withdraw 1000 cash for personal use
7- paid for the supplies purchased on account on may 3

8- borrowed 5000 from the bank .

9- provide service 5400 on account

5) For the items listed below, fill in the appropriate code letter to indicate whether
the item is an asset, liability, or owner's equity item.
Code
Asset

Liability

Owner's Equity

OE

_______ 1. Rent Expense

_______ 6. Cash

_______ 2. Equipment

_______ 7. Accounts Receivable

_______ 3. Accounts Payable

_______ 8. Owners Drawings

_______ 4. Owners Capital

_______ 9. Service Revenue

_______ 5. Insurance Expense

_______10. Notes Payable

Question 6: Following are the transactions for MR. ROOLF s Books of

accounts.
1. Invest in a business 100,000 SR cash.
2. Purchase furniture for 25,000 Cash.
3. Purchase equipment for SR 20,000, 10,000 cash and the rest on
account.
4. Purchase office supplies for SR 5,000 on credit from MR. X
5. Provided services for SR 15,000 Cash
6. Provided services for SR 8,000 on credit to MR. Y
7. Paid cash to Mr. X SR. 4,000
8. Received cash from Mr. Y SR 5000.
Requirements: Prepare the accounting equation for Mr. ROOLF s business.

Question 7: Mr. Ahmad has invested 150,000 SR cash to start a restaurant

business in Jeddah on 1st of January 2015. Following are the business
transactions happened over time.
1. Mr. Ahmad paid 2000 SR cash to buy furniture and equipment for his
shop on 15th of January 2013.
2. All of the supplies were purchased on cash for amount 8000 SR.
3. Revenues for the restaurant was 5000 SR cash.
4. Mr. Ahmad paid electricity expenses of 200 SR
5. MR. Ahmad paid salaries amounting 2000 SR,
6. On 20th of February, MR. Ahmad has taken 2000 SR from the business
for his personal use.
7. Received advertising bill for 1500 .
Requirements: Prepare the accounting equation for Mr. Ahmad business.