3820221046 Rakhimjon Bakhromov

Homework of Chapter 1. Accounting in Busines

1. According to Accounting equation we can get that

Assets = Liabilities + Equit
In this case, having increased assets by $20,000, while liabilities increased by $5,000,
requiring a rise in equity of $15,000

In order to nd Net income, we should use the original formula which is used to nd Change in
Equity where Investment and Net income add together and Withdrawals is eliminated. The formula
would be that
Change in Equity = Investment + Net Income - Withdrawal
From this formula, we can easily nd Net income
Net Income = Change in Equity - Investment + Withdrawal
NI = $15,000 - $3,000 +$11,00
NI = $23,00
The answer: Net Income is $23,00

2.
1. Business entity assumption. Buddy should either return the $500 to the company or report
it as a withdrawal. He should pay for soccer camp using a personal check in the future
2. Going-concern assumption. Buddy's Foreign Automotive is not shutting down. The
business is just shutting for the vacation. He may hold a suitable sale to gain extra business before
departing on vacation
3. Monetary unit assumption. Regarding to the accounting purposes, the invoice should be
restated in US dollars
4. Revenue recognition principle. Revenue should not be recognized since the service has
not been completed. The $1,500 should be deposited as Deposits Received from Customers
(a sort of unearned income) until the service is nished

3.
Date Assets Liabilities Equity

April 1 I N I

2 D N D

3 I, D I N

4 I, D N N

8 I N I

15 I N I

20 I, D N N

30 D N D

30 D N D

4.

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 3820221046 Rakhimjon Bakhromov

Ernst Consulting

Income statement
For the month of October 31

Revenues

Consulting fees earned $ 14,001

Total revenues 14,000

Expenses

Rent expenses 3,550

Salaries expenses 7,000

Telephone expenses 760

Miscellneous expenses 580

total expenses 11,890

Net income 2,110

Ernst Consulting

Statement of Owner’s Equity

For the month of October 31

C.Taylor, Capital October 1

Investment by owner $ 84,000

Net income 2,110

86,110

Withdrawals by owner 2,0000

C.Taylor, Capital, October 31 $ 84,110

Ernst Consulting

Balance sheet
For the month of October 31

Assets Liabilities & Equity

Cash $ 11,360 Accounts payable 8,500

Supplies
49,250 Total liabilities 8,500
O ce supplies

Land

Equipment 18,000 Equity

C.Taylor, Capital 84,110

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3820221046 Rakhimjon Bakhromov

Accounts receivable 14,000 Total liabilities and 92610

equity