Sample Transactions:

Transaction #1: Starting a Business

Gary Paul invests $50,000 of his money to start a business named “Humber Travel”.

Transaction #2: Purchase of Land

Humber travel purchases land for a future office location, paying cash of $40,000

Transaction #3: Purchase of Office Supplies

Humber Travel buys stationary and other office supplies, agreeing to pay $500 within 30 days.

Transaction #4: Earning Service Revenue

Humber Travel earns service revenue by providing travel arrangements services for clients. Assume the
business earns $5,500 and collects this amount in cash.

Transaction #5: Earning of Service Revenue on Account

Humber Travel performs services for clients who do not pay immediately. In return for the services,
Humber Travel issues an invoice and receives the clients’ promise to pay the $3,000 amount within one
month.

Transaction #6: Payment of Expenses

During the month, Humber Travel pays $2,700 in cash expenses: office rent $1,100; employee salary
$1,200 (for part-time assistant); and total utilities $1,400.

Transaction #7: Payment on Account

Humber Travel pays $400 to the store from which it purchased $500 worth of office supplies in
Transaction #3. (In accounting, we say that business pays $400 on account)

Transaction #8: Personal Transaction

Gary Paul remodels his home at a cost of $30,000, paying cash from his personal fund.

Transaction #9: Collection on Account

In Transaction #5, Humber Travel performed services for clients on account. The business now collects
$1,000 from a client (collects cash on account).

Transaction # 10: Sale on Land

An individual approaches Gary about selling a piece of land owned by Humber Travel. Gary and the
other person agree on sales of land for cash of $22,000.
Practice Exercises – Accounting 101
Question 1

Chuck Beavers opens a Bed & Breakfast business next to Humber College North Campus in Toronto. He is the sole
owner of the proprietorship, which he names “Beavers B & B”. During the first month of operations, January 2010,
the following transactions occurred:

(a) Beavers invest $ 35,000 of personal funds to start the business.

(b) The business purchases, on account, office supplies costing $ 350
(c) Beavers B & B pays cash of $ 30,000 to acquire a parcel of land. The business intends to use the land as a
future extension.
(d) The business provided lodging services for clients and receives cash of $ 1,900.
(e) The business pays $ 100 on the account payable created in Transaction (b).
(f) Chuck Beavers pays $ 2,000 of personal funds for a vacation for his family.
(g) The business pays cash expenses for office rent, $ 400, and utilities, $ 100
(h) The business returns to the supplier office supplies that cost $ 150. The wrong supplies were shipped.
(i) Chuck Beavers withdraws $ 1,200 cash for personal use.

Required:

(A) Analyze the preceding transactions in terms of their effects on the accounting equation of Beavers B & B.
(B) Prepare the income statement, statement of owner’s equity, and balance sheet of Beavers B & B after
recording the transactions.
 Beavers Bed & Breakfast
Income Statement
For the Month Ended January 31, 2010
Revenue:            
  Sales         $1,900  
             
Expenses:            
  Rent expense     $400    
  Utilities expense     100    
           
    Total Expenses       500  
Net Income         $1,400  
Beavers Bed & Breakfast
Statement of Owner's Equity
For the Month Ended January 31, 2010
Kool Upal, Capital, April 1, 2002       $0  
Add: Investment by owner       35,000  
  Net income for the month       1,400  
            36,400  
Less: Withdrawals by owner       1,200  
Kool Upal, Capital, April 30, 2002       $35,200  
               
Beavers Bed & Breakfast
Balance Sheet
January 31, 2010
Assets       Liabilities    
Cash   $5,100   Accounts Payable $100  
Accounts Receivable 0          
Office Supplies 200   Owner's Equity    
Land   30,000   Beaver's, Capital 35,200  
               
        Total liabilities and  
Total Assets $35,300   owner's equity $35,300  
Question 2

Recently, Tom Golden formed a Project Management Consulting practice as a sole proprietorship. The
balance of each item in the proprietorship accounting equation follows for April 2 and for each of the
nine business days given:

Cash A/R Office Land A/P Owner’s

Supplies Equity
April 02 $ 3,000 $ 7,000 $ 800 $ 11,000 $ 3,800 $ 18,000
9 6,000 4,000 800 11,000 3,800 18,000
14 4,000 4,000 800 11,000 1,800 18,000
17 4,000 4,000 1,100 11,000 2,100 18,000
19 6,000 4,000 1,100 11,000 2,100 20,000
20 4,900 4,000 1,100 11,000 1,000 20,000
22 10,900 4,000 1,100 5,000 1,000 20,000
25 10,900 4,200 900 5,000 1,000 20,000
26 10,700 4,200 1,100 5,000 1,000 20,000
30 6,600 4,200 1,100 5,000 1,000 15,900

Required:

(A) Assuming that a single transaction took place on each day, describe briefly the transaction that
was most likely to have occurred beginning with April 9. Indicate which accounts were affected
and by what amount. No revenue or expense transactions occurred on these dates.

Date Transaction
April 02
9 Collected $ 3,000 cash on the Accounts Receivable.
14 Paid $ 2,000 cash on the Accounts Payable.
17 Bough $ 300 supplies on account.
19 Tom Golden invested $ 2,000 in cash.
20 Paid $ 1,100 cash on the Accounts Payable.
22 Sold a piece of land for $ 6,000.
25 Returned $ 200 of supplies on account.
26 Paid cash $ 200 for office supplies.
30 Tom Golden withdrew $ 4,100 of cash.