On October 02, 2023, Mekdes, established her own consultancy business.

She named her business

"Kangaro Consultancy Services". The objective of the business is to render financial consultancy
services to clients on a fee basis. Below are business activities occurred during the first month of
operation of the firm (2 to 31 of October, 2023).

1. Oct. 2 - Mekdes, deposited Br. 200,000 cash in a bank account in the name of her business –
Kangaro Consultancy.

2. Oct. 5 - Mekdes transferred Equipment worth Br. 30,000 from her home for office uses by
Kangaro Consultancy Services.

3. Oct. 6 - Kangaro Consultancy Services, purchased Office Supplies worth Br. 7,000 from
various suppliers agreeing to pay the sum within two weeks.

4. Oct. 9 - Kangaro Consultancy received Br. 25,000 Cash for consultancy services it rendered to
a Cash client.

5. Oct. 12 - Kangaro Consultancy paid Br. 3,000 cash for advertising aired through ARTS TV.

6. Oct. 18 - Kangaro Consultancy received Br. 10,000 additional cash investment from its
owner.

7. Oct. 22 - Kangaro Consultancy rendered consultancy services worth Br. 15,000 to clients who
promised to pay the sum within a month.

8. Oct. 25 - Kangaro Consultancy collected Br. 5,000 cash from clients who received services.

9. Oct. 25- Kangaro Consultancy paid Br. 2,000 cash to suppliers on account.

10. Oct. 26 - Kangaro Consultancy purchased a used Vehicle for business purposes. The business
paid Br. 8,000 cash.

11. Oct. 27 - Kangaro Consultancy borrowed Br. 4,000 Cash from Birhan Bank. The loan is
repayable over ten months.

12. Oct. 29 - incurred and paid for the following expenses

Wages................................................. Br. 6,000

Utilities................................................ 1,200

Miscellaneous …............................... 800

Rent.................................................... 4,500

13. Oct. 31 - Kangaro Consultancy determined that cost of Office Supplies unconsumed on hand
at the end of the current month total Br. 1,300.

14. Oct. 31 - Kangaro Consultancy paid to the owner Br. 5,000 cash to pay house utility
expenses.
Required:

A) Analyze and record the above events in the financial records of Kangaro Consultancy
Services

B) Prepare Financial Statements for the business for the month of October 31, 2023.

A) Analyzing and Recording the Events in the Financial Records of Kangaro Consultancy Services:

1. Oct. 2 - Mekdes deposited Br. 200,000 cash in a bank account:

**Journal Entry:**

**Cash** 200,000

**Owner's Equity** 200,000

2. Oct. 5 - Transferred Equipment worth Br. 30,000 from home:

**Journal Entry:**

**Office Equipment** 30,000

**Owner's Equity** 30,000

3. Oct. 6 - Purchased Office Supplies worth Br. 7,000 on credit:

**Journal Entry:**

**Office Supplies** 7,000

**Accounts Payable** 7,000

4. Oct. 9 - Received Br. 25,000 cash from a client for services:

**Journal Entry:**

**Cash** 25,000
**Service Revenue** 25,000

5. Oct. 12 - Paid Br. 3,000 cash for advertising:

**Journal Entry:**

**Advertising Expense** 3,000

**Cash** 3,000

6. Oct. 18 - Received Br. 10,000 cash from owner as an additional investment:

**Journal Entry:**

**Cash** 10,000

**Owner's Equity** 10,000

7. Oct. 22 - Rendered services worth Br. 15,000 on credit:

**Journal Entry:**

**Accounts Receivable** 15,000

**Service Revenue** 15,000

8. Oct. 25 - Collected Br. 5,000 cash from clients for services rendered:

**Journal Entry:**

**Cash** 5,000

**Accounts Receivable** 5,000

9. Oct. 25 - Paid Br. 2,000 cash to suppliers on account:

**Journal Entry:**

**Accounts Payable** 2,000

**Cash** 2,000
10. Oct. 26 - Purchased a used Vehicle for business for Br. 8,000 cash:

**Journal Entry:**

**Vehicle** 8,000

**Cash** 8,000

11. Oct. 27 - Borrowed Br. 4,000 Cash from Birhan Bank:

**Journal Entry:**

**Cash** 4,000

**Notes Payable** 4,000

12. Oct. 29 - Paid for various expenses:

**Journal Entry:**

**Wages Expense** 6,000

**Utilities Expense** 1,200

**Miscellaneous Expense** 800

**Rent Expense** 4,500

**Cash** 12,500

13. Oct. 31 - Recognized unconsumed Office Supplies:

**Journal Entry:**

**Office Supplies Expense** 1,300

**Office Supplies** 1,300

14. Oct. 31 - Paid Br. 5,000 to owner for house utility expenses:

**Journal Entry:**

**Owner's Drawings** 5,000

**Cash** 5,000
B) Prepare Financial Statements for Kangaro Consultancy Services for the month of October 31,
2023:

**Income Statement:**

```

Service Revenue 40,000

Less: Expenses

Advertising Expense 3,000

Wages Expense 6,000

Utilities Expense 1,200

Miscellaneous Expense 800

Rent Expense 4,500

Office Supplies Expense 1,300

Total Expenses 16,800

Net Income 23,200

```

**Statement of Owner's Equity:**

```

Owner's Equity, Oct. 2 -

Add: Additional Investment 10,000

Less: Drawings 5,000

Net Income 23,200

Owner's Equity, Oct. 31 28,200

```

**Balance Sheet:**
```

Assets

Cash 125,200

Accounts Receivable 10,000

Office Supplies 5,700

Office Equipment 30,000

Vehicle 8,000

Total Assets 178,900

Liabilities

Accounts Payable 9,000

Notes Payable 4,000

Total Liabilities 13,000

Owner's Equity 28,200

Total Liabilities and Owner's Equity 178,900

```

**Cash Flow Statement:**

```

Operating Activities:

Net Income 23,200

Adjustments for:

Changes in Accounts Receivable (10,000)

Changes in Accounts Payable 2,000

Changes in Office Supplies (1,300)

Net Cash from Operating Activities: 13,900

Investing Activities:

Purchase of Office Equipment (30,000)

Purchase of Vehicle (8,000)

Net Cash from Investing Activities: (38,000)

Financing Activities:

Additional Investment 10,000

Borrowing from Bank 4,000

Drawings by Owner (5,000)

Net Cash from Financing Activities: 9,000

Net Increase in Cash (15,100)

Cash at Beginning of Month 200,000

Cash at End of Month 184,900

```

**Financial Ratios:**

- **Profit Margin:** (Net Income / Revenue) x 100

Profit Margin = (23,200 / 40,000) x 100 = 58%

- **Return on Investment (ROI):** (Net Income / Investment) x 100

ROI = (23,200 / 210,000) x 100 = 11.05%

- **Current Ratio:** Current Assets / Current Liabilities

Current Assets = 125,200 + 10,000 + 5,700 = 140,900

Current Liabilities = 9,000 + 4,000 = 13,000

 Current Ratio = 140,900 / 13,000 = 10.84

These additional financial statements and ratios provide a more detailed overview of Kangaro
Consultancy Services' financial performance for the month of October 31, 2023.