Use the following trial balance to prepare income statement, statement of owner’s equity and balance sheet for year ended in 31/12/2018
| Account title | Dr | Cr |
| Service revenue | 10600 | |
| Salaries expense | 5200 | |
| Supplies expense | 1500 | |
| Rent expense | 900 | |
| Insurance expense | 50 | |
| Interest expense | 50 | |
| Utility expense | 40 | |
| Capital | 10000 | |
| Dividends | 500 | |
| Cash | 15200 | |
| Account receivables | 200 | |
| Supplies | 1000 | |
| Office equipment | 4960 | |
| Notes payables | 5000 | |
| Account payable | 2500 | |
| Interest payable | 50 | |
| Salaries payable | 1450 | |
| Total | 29600 | 29600 |
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Solutions
A.) Preparation of an income statement
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Income Statement |
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For year ended December 31,2018 |
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Particulars |
Amounts | |
| Revenue | ||
| Service revenue | $ 10,600 | |
| Total Revenue | $ 10,600 | |
| Operating Expenses | ||
| Salaries expense | $ 5,200.00 | |
| Supplies expense | $ 1,500.00 | |
| Rent expense |
$ 900.00 |
|
| Insurance expense |
$ 50.00 |
|
| Interest expense |
$ 50.00 |
|
| Utility expense |
$ 40.00 |
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| Total Operating Expenses | $ 7,740.00 | |
| Net (loss)/ Profit | $ 2,860.00 | |
Net loss/profit = Total Revenue less Total Operating Expense
($10,600-$7,740) = (2,860)
b.) Preparation of Owners Equity
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Statement of Owner’s Equity |
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As at December 31,2018 |
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| Capital Trial Balance |
$ 10,000.00 |
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| Add: Additional Capital |
- |
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| Net profit |
$ 2,860.00 |
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| Less: Drawings |
- |
|
| Dividend Paid |
$ -500.00 |
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| Owner’s Equity |
$ 13,360.00 |
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Net profit used is from the income statement above
c.) Preparation of balance sheet
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Balance Sheet |
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For the year ended as at December 31,2018 |
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Assets |
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| Current Assets | ||
| Cash |
$ 15,200.00 |
|
| Account receivable |
$ 200.00 |
|
| Supplies |
$ 1,000.00 |
|
Total Current Assets |
$ 16,400.00 | |
| Plant And Equipment | ||
| Office Equipment |
$ 4,960.00 |
|
| Total Assets | $ 21,360.00 | |
| Liabilities and Owner’s Equity | ||
| Current Liabilities | ||
| Note payable |
$ 5,000.00 |
|
| Accounts payable |
$ 2,500.00 |
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| Interest payable |
$ 50.00 |
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| Salaries payable |
$ 1,450.00 |
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| Total Current Liabilities |
9,000.00 |
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| Owner’s Equity | ||
| Owner’s capital |
$ 10,000.00 |
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| Retained earnings ($2,860-500) |
$ 2,360.00 |
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| Total Owners’ Equity |
$ 12,360.00 |
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| Total Liabilities And Owners’ Equity |
$ 21,360.00 |
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