MAGIS ACADEMIC MENTORS

Chapter 1
Accounting 10/15 Chapters 1 and 2 – Handout

ACCOUNTING – an information and measurement system that identifies, records, and communicates relevant, reliable and comparable information
about an organization’s business activities.

1. Identifying business activities: select only transactions and events that are relevant to an organization (example: sale of vehicles by Ford)
2. Recording of business activities: a chronological log of transactions and events expressed in money units (ex. dollars) and is classified and
summarized in a useful format (example: journal entries)
3. Communicating business activities: preparing accounting reports such as financial statements

USERS OF ACCOUNTING INFORMATION:

1. External Users – not directly involved in running the organization
a. Shareholders – since they are the owners of the organization, they use the accounting reports in deciding whether to buy,
hold or sell stock. They also want to know if their investment is earning.
b. Lenders – look for information to help them assess whether an organization is likely to repay its loans with interest
c. Government – for tax purposes
d. Others such as customers, suppliers, regulators, lawyers, brokers, press
Note: The area of accounting that aims to serve the needs of external users is called Financial Accounting.

2. Internal Users –those that are directly involved in running the organization
a. Research and Development managers – projecting costs and revenues of proposed changes in products and services
b. Purchasing managers – to know what, when and how much to purchase
c. Production managers – depend on information to monitor costs and ensure quality
Note: The area of accounting that aims to serve the needs of internal users is called Managerial Accounting.

Forms of Business Organizations

1. Sole Proprietorship - there is only one owner
Characteristics : considered as a separate entity for accounting purposes but not a separate legal entity from its owner
: unlimited liability - creditors can go after the personal belongings of the owner as payments for the proprietor's debt
: income is not subject to business tax, but it is reported and taxed as part of the owner's personal income tax return
2. Partnership - owned by two or more persons called partners; roles and profits/losses are divided according to partnership agreement
Characteristics: same as sole proprietorship
Types: a) Limited Partnership (LP) - combination of general partners with unlimited liability and limited partners with restricted liability
b) Limited Liability Partnership (LLP) - restricts partners' liabilities to their own acts but they are responsible for partnership debt
c) Limited Partnership Company (LLC) - offers limited liability of a corporation and tax treatment of a partnership or proprietorship
3. Corporation -separate legal entity; conducts business with rights, duties and responsibilities of a person
Shares or Stocks - certificates or division of ownership of corporations
Shareholders or Stockholders - owners of corporations
Characteristics : limited liability (restricted to the amount invested by the owners)
: double taxation (the corporation is taxed and the dividends given to the owners are also taxed)

Generally Accepted Accounting Principles (GAAP) - concepts and rules that govern accounting practices
- aims to make information in financial statements relevant, reliable and comparable

1. Business Entity - the business is accounted for separately from other business entities and the owners.
- Accounting Equation (Assets = Liabilities + Equity): business owns the assets and owes the creditors or the owner as claimants
2. Going Concern - assumes that the business will continue to operate instead of being closed or sold
- justifies the recording of assets at cost instead of liquidation value or realizable values
3. Time Period or Accounting Period - assumes that the life of the company can be divided into time intervals called periods (ex. quarters, months, years)
Annual Financial Statements - reports covering one year
Interim Financial Statements - reports covering less than one year (ex. one month, one quarter or one semi-annual)
Fiscal Year - any 12 consecutive months (ex. schools: from April to March)
a. Calendar year - January to December (used by companies with little seasonal variations)
b. Natural Business year - from peak season to off-season (used by companies with seasonal variations)
 MAGIS ACADEMIC MENTORS
Chapter 1

4. Stable Monetary Unit - all transactions and events are expressed in terms of monetary or money units to achieve uniformity in financial data
- usually, monetary unit of the country where the business operates is used (some reports are also expressed in other monetary units)
5. Cost Principle - accounting information is based on historical cost measured by cash or of equal-to-cash basis, rather than on the market value
- the value of an asset will not be adjusted to the changes in its current price in the market
- the cost is allocated to expense as the asset is consumed or used up (ex. depreciation or insurance expired)
- emphasizes reliability and verifiability
6. Objectivity (reliability) - information is supported by independent, unbiased evidence (ex. invoices, contract, paid checks, receipts or physical inventory)
7. Realization Principle - provides the condition when to recognizing revenues (or sales for merchandising company)
- recognizes revenues when services or products have been delivered regardless of the timing of receipt of cash
Revenues (sales) - the amount of cash or receivable (or other assets) generated by performing services or delivering products
8. Matching Principle (also called Expense Recognition Principle) - recognizes expense when incurred (consumed, used up or expired) to generate revenues
within the same accounting period
9. Consistency Principle - requires that methods or systems should not be changed from period to period once adopted (ex. depreciation method)
10. Disclosure Principle - requires the company to report details (footnotes or notes) behind the financial statements
- financial position or relevant facts are communicated to the users (stockholders, creditors, etc.)
11. Materiality - only relevant information that would influence the decisions will be recorded; trivial matters or information are disregarded
12. Conservatism - recognizes expenses and liabilities as soon as possible even when there is uncertainty about the outcome, but only recognizes revenues and assets
when they are assured of being received
- given a choice between several outcomes where the probabilities of occurrence are equally likely, you should record the transaction
that will result in the lower amount of profit, or at least the deferral of a profit.

ACCOUNTING EQUATION

Assets = Liabilities + Equity

What the company owns = What the company owes the creditors and owners

Assets – resources owned and controlled by the company that will provide future benefits
Liabilities – what the company owes its creditors. These are claims by creditors against assets
- obligations to transfer assets or deliver the products or services to other entities.
Equity – claims of owners to the asset of the company; value of ownership (investment plus net income less withdrawals)

EXTENDED ACCOUNTING EQUATION

Assets = Liabilities + Owner’s Investments - Owner’s Withdrawals + Revenues – Expenses
Balance Sheet - breakdown of assets, liabilities and equity; snapshot of financial position of a company on a particular date
Liquidity - order or arrangement of assets in the balance sheet; rate or speed that assets can be converted to cash or be consumed/used up

Magis Academic Mentors

Balance Sheet
As of December 31, 2015

Assets Liabilities
Cash 24,000 Accounts Payable 18,300
Short-term Investments/Marketable Securities 9,500 Notes Payable 10,500
Accounts Receivable 37,500 Salaries Payable 22,800
Notes Receivable 5,500 Rent Payable 12,000
Merchandise Inventory 28,000 Utilities Payable 7,300
Supplies 2,100 Taxes Payable 14,890
Prepaid Insurance 12,000 Interest Payable 4,250
Prepaid Rent 13,200 Unearned Revenues 18,400
Prepaid Advertising 3,480 Long-term Note Payable 30,000
Equipment 48,900 Mortgage Payable 40,100
Building 96,000 Total Liabilities 178,540
Land 120,000
Intangible Assets 17,230 Equity
Total Assets 417,410 V. Ang, Capital 238,870
Total Liabilities and Equity 417,410
 MAGIS ACADEMIC MENTORS
Chapter 1
ASSET ACCOUNTS
Cash – reflects a company’s cash balance. It includes money and any medium of exchange that a bank accepts for deposit (coins, bills, checks, money orders)
Marketable Securities or Short-term Investments - debt and equity securities that are readily convertible to cash
(ex. short-term investment in stocks of other companies or treasury bills)
Accounts Receivable or Accrued Revenue - refers to promises of payment from customers to sellers. These transactions are often called credit sales or sales
on account.
Notes Receivable - promissory note, is a written promise of another entity to pay a definite sum of money on a specified future date to the holder of the note.
Merchandise Inventory - items for sale (not yet covered in Chapters 1 to 4; covered starting Chapter 5)
Supplies - small items that support the operations like glue, post it, scotch tape, scissors, bond paper, pens, etc.
- converted to expense when used up or consumed
Prepaid Expenses/Prepaid Assets/Deferred Expense - general term to refer to items that have been paid but not yet consumed
- the prepaid accounts are transferred to expense when they expire or are consumed
Specific Prepaid Expense Accounts: Prepaid Rent, Prepaid Advertising, Prepaid Insurance
Equipment - examples are computers, printers, desks, chairs, ladders, hoists, etc. When equipment is used and gets worn down, its cost is gradually reported
as an expense (called depreciation expense). Usually grouped into Office Equipment and Store Equipment
Buildings - Examples are stores, offices, warehouses, etc. They provide future benefits to those who control and own them. They are also depreciated over
its useful life.
Land - the ground owned by the company that is used for business operations; it includes ground on which the company locates its headquarters or land used
for outside storage space or as a parking lot. Land is not subject to depreciation.
Intangible assets – Assets or resources without physical form but provide benefits for business operations.
(ex. patents, trademarks, copyrights, franchises, and goodwill. )

LIABILITY ACCOUNTS
Accounts Payable – refers to oral or implied promises to pay later, which commonly arise from purchases of merchandise, supplies,
equipment or services
Notes Payable - refers to a formal promise, usually denoted by the signing of a promissory note, to pay a future amount.
Accrued Expenses or Accrued Liabilities - general term to refer to amounts of consumption that are not yet paid.
Specific Accrued Expense Accounts: Salaries Payable, Rent Payable, Utilities Payable, Taxes Payable and Interest Payable
Unearned Revenues/Deferred Revenues - obligation of the company to deliver the service or product in the future
- arises from the payment of customers for services or products for services or products that have not been delivered to them
Long-term Notes Payable - a liability that is supported by a promissory note that will be paid in a term that is longer that one period or one year,
whichever is longer
Mortgage Payable - a long-term liability that is secured by a collateral (something pledged as security for repayment of a loan, to be forfeited in
the event of a default.)
EQUITY ACCOUNTS

Owner, Capital - value of the ownership of the owner [investment + net income (less: net loss) - withdrawals]

Other Equity Accounts:

Owner, Withdrawal - cash or other assets taken out by the owner for personal consumption;
- not treated as expense by the company but it is deducted in owner's capital in the statement of owner's equity
Revenues - cash or other assets generated by providing services or delivering products to the customers; appears in the income statement
Expenses - decrease in asset or increase in liability arising from a consumption or expiration; appears in the income statement

FINANCIAL STATEMENTS

1. Balance Sheet - describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.
2. Income Statement - describes a company’s revenues and expenses along with the resulting net income or loss over a period of time due to
business activities
3. Statement of Owner's Equity - explains changes in equity from net income (or loss) and from owner investments and withdrawals over a
period of time.
4. Statement of Cash Flows - describes the inflows and outflows of cash from operating, investing and financing activities.

Financial Statements to be covered:

Accounting 10 (Balance Sheet, Income Statement and Statement of Owner's Equity)
Accounting 15 (All the financial statements; Cash Flows will de discussed in the last long test)
Accounting 20 (All financial statements)
 MAGIS ACADEMIC MENTORS
Chapter 1

Financial Statement Format:

Magis Academic Mentors
Income Statement
For the year ended December 31, 2015

Revenues 230,500
Less: Expenses
Salaries Expense 44,570
Rent Expense 20,400
Utilities Expense 13,890
Supplies Expense 4,200
Insurance Expense 4,900
Advertising Expense 3,050
Interest Expense 2,790
Depreciation Expense 32,500
Miscellaneous Expense 2,920
Taxes Expense 9,500 138,720
Net Income 91,780

Magis Academic Mentors

Statement of Owner's Equity
For the year ended December 31, 2015

V. Ang, Capital, January 1, 2015 120,000

Add: Investment 40,500
Net Income 91,780 132,280
252,280
Less: Withdrawals 24,000
V. Ang, Capital, December 31, 2015 228,280

Magis Academic Mentors

Balance Sheet
As of December 31, 2015

Assets Liabilities
Cash 24,000 Accounts Payable 18,300
Short-term Investments/Marketable Securities 9,500 Notes Payable 10,500
Accounts Receivable 37,500 Salaries Payable 22,800
Notes Receivable 5,500 Rent Payable 12,000
Supplies 2,100 Utilities Payable 7,300
Prepaid Insurance 12,000 Taxes Payable 14,890
Prepaid Rent 13,200 Interest Payable 4,250
Prepaid Advertising 3,480 Unearned Revenues 18,400
Equipment 48,900 Long-term Note Payable 30,000
Building 96,000 Mortgage Payable 22,690
Land 120,000 Total Liabilities 161,130
Intangible Assets 17,230
Total Assets 389,410 Equity
V. Ang, Capital 228,280
Total Liabilities and Equity 389,410
 MAGIS ACADEMIC MENTORS
Chapter 1

Connections among the Financial Statements

(Balance Sheet) Assets = Liabilities + Equity

(Statement of Owner's Equity) Beginning Capital + Investment + Net Income - Withdrawals

(Income Statement) Revenues - Expenses

Transaction Analysis
- Every transaction affects at least two accounts (addition property of equality)
- the accounting equation is always balance

Example:
Yu Company started its operations on January 1, 2017. The following transactions took place in the first month of the year.
1 John Yu invested P50,000 cash and P70,000 equipment in the company.
3 Purchased P5,300 supplies for cash.
5 Delivered P27,500 services and immediately received cash.
8 Borrowed P25,000 cash from the bank.
10 Delivered services to a customer worth P28,400 on credit.
13 Purchased additional supplies worth P12,900 on credit.
16 Paid one-year insurance premium worth P24,000 that will commence on Feb. 1, 2017.
18 Collected P20,500 as partial payment for services delivered on January 10.
20 The owner withdraw P17,500 cash.
21 Paid P9,500 accounts payable.
23 Used P13,800 supplies.
26 Received P23,100 cash from a customer for services to be rendered on March 10, 2017.
27 Paid the rent worth P16,000 for the months of January.
30 Paid the salaries of employees amounting to P14,000.
31 Received the bill for March utilities worth P8,500.

Requirements:
a) Determine the impact of the transaction on the accounting equation.
b) Prepare the financial statement

Solution ASSETS LIABILITIES EQUITY

Accounts Prepaid Accounts Utilities Unearned Notes J. Yu, J. Yu,
Date Cash Receivable Supplies Insurance Equipment Payable Payable Revenues Payable Capital Withdrawals Revenues Expenses
1 50,000 70,000 120,000
3 (5,300) 5,300
5 27,500 27,500
8 25,000 25,000
10 28,400 28,400
13 12,900 12,900
16 (24,000) 24,000
18 20,500 (20,500)
20 (17,500) (17,500)
21 (9,500) (9,500)
23 (13,800) (13,800) (Supplies)
26 23,100 23,100
27 (16,000) (16,000) (Rent)
30 (14,000) (14,000) (Salaries)
31 8,500 (8,500) (Utilities)
59,800 7,900 4,400 24,000 70,000 3,400 8,500 23,100 25,000 120,000 (17,500) 55,900 (52,300)
 MAGIS ACADEMIC MENTORS
Chapter 1

Financial Statements
Yu Company
Income Statement
For the month ended January 1, 2017

Revenues 55,900
Less: Expenses
Supplies Expense 13,800
Rent Expense 16,000
Salaries Expense 14,000
Utilities Expense 8,500 52,300
Net Income 3,600

Yu Company
Statement of Owner's Equity
For the month ended January 1, 2017

J. Yu, Capital, January 1, 2017 0

Add: Investment 120,000
Net Income 3,600
Less: Withdrawals (17,500)
J. Yu, Capital, January 31, 2017 106,100

Yu Company
Balance Sheet
As of January 31, 2017

Assets Liabilities
Cash 59,800 Accounts Payable 3,400
Accounts Receivable 7,900 Utilities Payable 8,500
Supplies 4,400 Unearned Revenue 23,100
Prepaid Insurance 24,000 Notes Payable 25,000
Equipment 70,000 Total Liabilities 60,000
Total Assets 166,100
Equity
J. Yu, Capital 106,100
Total Liabilities and Equity 166,100
 MAGIS ACADEMIC MENTORS
Chapter 2

ACCOUNTING CYCLE 1. Analyze

transactions

10. Reverse 2. Journalize

9. Prepare
post-closing 3. Post
trial balance

4. Prepare
8. Close unadjusted
trial balance

7. Prepare
5. Adjust
statements
6. Prepare
adjusted trial
balance

Steps 1, 2, 3, 4 and 7 are covered until Chapter 2. The rest of the steps will be covered in Chapters 3 and 4.

Other Important Terms:

1. Account – record of increases and decreases in a specific asset, liability, equity, withdrawal, revenue or expense item.
2. Ledger – record containing all accounts used by a company (also called BOOKS)
3. T-account – represents a ledger account and is a tool used to understand the effects of one or more transaction on an account.
Its name comes from its shape like the letter T.

Example: Account Name

Debit Credit

4. Debit (Dr.) - left side (increase in assets, expenses and withdrawals; decrease in liabilities and revenues)
Credit (Cr.) - right side (increase in liabilities, investment and revenues; decrease in assets and expenses)

Assets = Liabilities + Equity

⬆ (+) ⬇ ( - ) ⬇ ( - ) ⬆ (+)
Debit Credit Debit Credit

Capital + Revenues - Expenses - Withdrawals

⬇ ( - ) ⬆ (+) ⬇ ( - ) ⬆ (+) ⬆ (+) ⬇ ( - ) ⬆ (+) ⬇ ( - )
Debit Credit Debit Credit Debit Credit Debit Credit

5. Normal balance (of an account) – expected balance of an account (side of T-account in which increases are recorded)
Account Asset Liabilities Capital Revenues Expenses Withdrawals
Normal Balance Debit Credit Credit Credit Debit Debit

6. Double-Entry Accounting - one transaction affects at least two accounts; debit is always equal to credit

Application of Accounting Cycle:

1. Journalizing - record of original entry
2. Posting - transfer of amounts from journal entries to T-accounts or ledger
- used to arrive at the balances of each account
3. Trial Balance - list of accounts used and their balances
- (order of accounts: assets, liabilities, capital, withdrawal, revenues and expenses)
- Total of Debit Colum = Total of Credit Column
4. Financial Statements:
a) Income Statement
b) Statement of Owner's Equity
c) Balance Sheet
 MAGIS ACADEMIC MENTORS
Chapter 2

Example:
After retiring from the accounting department, Venus Reyes started his own tutorial and review center named Magis Academic Mentors.
The following transactions took place in 2015:
June 1. Venus Reyes invested P50,000 cash, equipment costing P100,000 with a market value equal 40% of its cost and his apartment
whose cost is P2,500,000 but with market value of P1,000,000 to be used as office space.
June 2. Signed a contract to rent additional space to be used as classrooms. Monthly rent is P15,000.
June 3. Paid P15,000 rent for the month of June.
June 5. Paid P7,000 cash for supplies.
June 10. Purchased additional equipment worth P50,000 by paying P20,000 cash and the rest on credit.
June 20. Delivered tutorial services worth P30,000 and received cash.
June 25. Purchased additional supplies worth P8,000 on account.
June 29. Conducted preparatory lessons in cost accounting for P70,000. The students promised to pay the following week.
June 30. Received electric bill for the month of June amounting to P12,000.
July 1. Hired two accounting mentors who would be paid P8,000 each every 15th and end of the month. They started working on the same day.
July 2. Borrowed P80,000 from the bank. Monthly interest of P2,000 would be paid every end of the month. The principal will be paid at the end of the year.
July 3. Conducted UPCAT reviews for a group of senior high school students for a total worth of P100,000. Half of the students paid on that day
while the rest promised to pay within the year.
July 4. Paid the electric bill received last June 30.
July 5. Received the payment of the students for the services delivered on June 29.
July 10. Paid the supplies purchased on June 25.
July 12. Ten students signed up to avail P50,000 worth unlimited package of accounting tutorials for the month of August.
July 15. Paid the two mentors their salaries for the first half of the month.
July 20. Ordered additional equipment costing P25,000.
July 23. Delivered math tutorials to Ateneo freshmen for P20,000 who paid right away.
July 25. Consumed P13,000 worth of supplies.
July 27. Received the equipment ordered last July 20. The company paid P10,000 and issued a promissory note for the balance.
July 29. Issued a check for the monthly rent.
July 31. Made the payments for the salary of the mentors for the second half of July and interest for the notes payable made last July 2.
The company also paid electric consumption worth P13,000 for the month of July.
August 4. Issued a check worth P12,000 to ARSA as sponsorship for the organization's orientation seminar this month.
August 8. Withdrew P34,000 cash and P1,500 supplies for personal consumption.
August 10. Received the payment of the students who signed-up last July 12. Tutorial services are expected to fulfilled within the month.
August 12. Received 1/4 of the accounts receivable from July 3 transaction.
August 13. Conducted ACED reviews for another group of students who paid P60,000 right away.
August 15. Paid the salary of the mentors.
August 16. Hired an accountant who started right away and would be paid P10,000 every 15th and end of the month.
August 18. Received P70,000 reservation fee for college entrance test reviews to be delivered next year.
August 19. A student whose family owned an office supply company gave P7,000 supplies in exchange for the tutorial services availed on that day.
August 24. Received a post dated check amounting to P16,000 for the tutorial services on that day.
August 27. Paid the rent for August.
August 28. Expecting that the number of students would increase next month, Mercury signed a contract to lease an additional space adjacent to its
present location. He paid P45,000 for three months rent commencing September 1 of this year.
August 29. Paid P24,000 for fire insurance covering one year starting September 1.
August 30. Mercury went to Japan for vacation and used P50,000 cash from the company.
August 31. Since the owner was away, payments due on this day could not be paid. However, the accountant recommended to recognize expenses
associated with salaries and interest. The company also received the electric bill amounting to P9,500 for the month of August.
Journalize the transactions, post the transactions, prepare a trial balance and prepare the financial statements for three months ending August 31, 2015.
(Ignore depreciation)
Solution MAGIS ACADEMIC MENTORS
Part I. Journal Entries 27 Dr. Equipment 25,000
June Cr. Cash 10,000
1 Dr. Cash 50,000 Notes Payable 15,000
Equipment 40,000
Building 1,000,000 29 Dr. Rent Expense 15,000
Cr. V. Reyes, Capital 1,090,000 Cr. Cash 15,000

2 No transaction 31 Dr. Salaries Expense 16,000

Interest Expense 2,000
3 Dr. Rent Expense 15,000 Utilities Expense 13,000
Cr. Cash 15,000 Cr. Cash 31,000
August
5 Dr. Supplies 7,000 4 Dr. Advertising Expense 12,000
Cr. Cash 7,000 Cr. Cash 12,000

10 Dr. Equipment 50,000 8 Dr. V. Reyes, Withdrawals 35,500

Cr. Cash 20,000 Cr. Cash 34,000
Accounts Payable 30,000 Supplies 1,500

20 Dr. Cash 30,000 10 Dr. Cash 50,000

Cr. Revenues 30,000 Cr. Revenues 50,000

25 Dr. Supplies 8,000 12 Dr. Cash 12,500

Cr. Accounts Payable 8,000 Cr. Accounts Receivable 12,500

29 Dr. Accounts Receivable 70,000 13 Dr. Cash 60,000

Cr. Revenues 70,000 Cr. Revenues 60,000

30 Dr. Utilities Expense 12,000 15 Dr. Salaries Expense 16,000

Cr. Cash
Utilities Payable 12,000 Cr. Cash 16,000
July
1 No Transaction 16 No transaction

2 Dr. Cash 80,000 18 Dr. Cash 70,000

Cr. Notes Payable 80,000 Cr. Unearned Revenues 70,000

3 Dr. Cash 50,000 19 Dr. Supplies 7,000

Accounts Receivable 50,000 Cr. Revenues 7,000
Cr. Revenues 100,000
24 Dr. Notes Receivable 16,000
4 Dr. Utilities Payable 12,000 Cr. Revenues 16,000
Cr. Cash 12,000
27 Dr. Rent Expense 15,000
5 Dr. Cash 70,000 Cr. Cash 15,000
Cr. Accounts Receivable 70,000
28 Dr. Prepaid Rent 45,000
10 Dr. Accounts Payable 8,000 Cr. Cash 45,000
Cr. Cash 8,000
29 Dr. Prepaid Insurance 24,000
12 No transaction Cr. Cash 24,000

15 Dr. Salaries Expense 16,000 30 Dr. V. Reyes, Withdrawals 50,000

Cr. Cash 16,000 Cr. Cash 50,000

20 No transaction 31 Dr. Salaries Expense 26,000

Interest Expense 2,000
23 Dr. Cash 20,000 Utilities Expense 9,500
Cr. Revenues 20,000 Cr. Salaries Payable 26,000
Interest Payable 2,000
25 Dr. Supplies Expense 13,000 Utilities Payable 9,500
Cr. Supplies 13,000
 MAGIS ACADEMIC MENTORS
Chapter 2

Part II. Posting Part III. Trial Balance

Cash Accounts Payable V. Reyes, Capital Magis Academic Mentors

(6/1) 50,000 15,000 (6/3) (7/10) 8,000 30,000 (6/10) 1,090,000 (6/1) Trial Balance
(6/20) 30,000 7,000 (6/5) 8,000 (6/25) As of August 31, 2015
(7/2) 80,000 20,000 (6/10) 30,000
(7/3) 50,000 12,000 (7/4) V. Reyes, Withdrawals Cash 162,500
(7/5) 70,000 8,000 (7/10) Salaries Payable (8/8) 35,500 Accounts Receivable 37,500
(7/23) 20,000 16,000 (7/15) 26,000 (8/31) (8/30) 50,000 Notes Receivable 16,000
(8/10) 50,000 10,000 (7/27) 85,500 Supplies 7,500
(8/12) 12,500 15,000 (7/29) Prepaid Rent 45,000
(8/13) 60,000 31,000 (7/31) Utilities Payable Prepaid Insurance 24,000
(8/18) 70,000 12,000 (8/4) (7/4) 12,000 12,000 (6/30) Revenues Equipment 115,000
34,000 (8/8) 9,500 30,000 (6/20) Building 1,000,000
16,000 (8/15) 9,500 70,000 (6/29) Accounts Payable 30,000
15,000 (8/27) 100,000 (7/3) Salaries Payable 26,000
45,000 (8/28) 20,000 (7/23) Utilities Payable 9,500
24,000 (8/29) Interest Payable 50,000 (8/10) Interest Payable 2,000
50,000 (8/30) 2,000 (6/31) 60,000 (8/13) Notes Payable 95,000
162,500 7,000 (8/19) Unearned Revenues 70,000
Notes Payable 16,000 (8/24) V. Reyes, Capital 1,090,000
Accounts Receivable 80,000 (7/2) 353,000 V. Reyes, Withdrawal 85,500
(6/29) 70,000 70,000 (7/5) 15,000 (7/27) Revenues 353,000
(7/3) 50,000 12,500 (8/12) 95,000 Rent Expense 45,000
37,500 Rent Expense Utilities Expense 34,500
Unearned Revenues (6/3) 15,000 Salaries Expense 74,000
Notes Receivable 70,000 (8/18) (7/29) 15,000 Supplies Expense 13,000
(8/24) 16,000 (8/27) 15,000 Interest Expense 4,000
45,000 Advertising Expense 12,000
Supplies Total 1,675,500 1,675,500
(6/5) 7,000 13,000 (7/25) Utilities Expense
(6/25) 8,000 1,500 (8/8) (6/30) 12,000
(8/19) 7,000 (7/31) 13,000
7,500 (8/31) 9,500
34,500
Prepaid Rent
(8/28) 45,000 Salaries Expense
(7/15) 16,000
Prepaid Insurance (7/31) 16,000
(8/29) 24,000 (8/15) 16,000
(8/31) 26,000
Equipment 74,000
(6/1) 40,000
(6/10) 50,000 Supplies Expense
(7/27) 25,000 (7/25) 13,000
115,000

Building Interest Expense

(6/1) 1,000,000 (7/31) 2,000
(8/31) 2,000
4,000

Advertising Expense
(8/4) 12,000
 MAGIS ACADEMIC MENTORS
Chapter 2
Part IV. Financial Statements

Magis Academic Mentors

Income Statement
For three months ended August 31, 2015

Revenues 353,000
Less: Expenses
Rent Expense 45,000
Utilities Expense 34,500
Salaries Expense 74,000
Supplies Expense 13,000
Interest Expense 4,000
Advertising Expense 12,000 182,500
Net Income 170,500

Magis Academic Mentors

Statement of Owner's Equity
For three months ended August 31, 2015

V. Reyes, Capital, June 1, 2015 0

Add: Investment 1,090,000
Net Income 170,500
1,260,500
Less: Withdrawals 85,500
V. Reyes, Capital, August 31, 2015 1,175,000

Magis Academic Mentors

Balance Sheet
As of August 31, 2015

Assets Liabilities
Cash 162,500 Accounts Payable 30,000
Accounts Receivable 37,500 Salaries Payable 26,000
Notes Receivable 16,000 Utilities Payable 9,500
Supplies 7,500 Interest Payable 2,000
Prepaid Rent 45,000 Notes Payable 95,000
Prepaid Insurance 24,000 Unearned Revenues 70,000
Equipment 115,000 Total Liabilities 232,500
Building 1,000,000
Total Assets 1,407,500 Equity
V. Reyes, Capital 1,175,000
Total Liabilities and Equity 1,407,500