Transaction 11 TPS agreed to paint a customers house but cannot begin the job

# Transaction 11 tps agreed to paint a customers house

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Monday, February 16, 2015 are not a component of net income. Instead, dividends directly reduce retained earnings. The effect of the transaction on the accounting equation is: Assets and equity both decrease. Recap: Assets [=] Liabilities [+] Stockholders Equity Cash Retained Earnings -\$500 -\$500 Assets Liabilities Stockholders’ Equity Contri buted Capit al Retained Earnings Cash Accts Rec. Suppl ies Insur ance Equip ment Accts Payable Un Rev Notes payable Stock Reve nue Expe nses Divid ends 1 1000 1000 2 1500 1500 3 (450) 450 4 250 250 5 800 800 6 1450 1450 7 (250) (250) 8 (120) (120) 9 1000 (1000) 10 75 (75) 11 1950 1950 12 (300) 300 13 (500) (500) 4630 450 250 300 450 75 1950 1500 1000 2250 (195) (500) 6080 6080 17
Monday, February 16, 2015 Next Steps: - First, we verify that the accounting equation is in balance. Each transaction must keep the equation in balance, and the totals must also be in balance. We can use the information provided in the transactions analysis grid to prepare financial statements. We know revenues and expenses to find net income: - Revenue - expenses = net income - (2250 – 195) = \$2,055. We can determine the ending balance of RE: - Beginning RE + Net income – dividends = ending balance of RE - 0 + 2055 – 500 = \$1,555 We can prepare a balance sheet that shows the following: Powerpoint: The Recording Process - Review Financial events called transactions occur. We analyze these transactions to determine their affect on the accounting equation.