Accounting Review Problem 1
The Effect of Transactions on the Accounting Equation
Charlene Rudek finished law school in June and immediately set up her own law practice. During the first month of operation, she completed the following transactions:
- Begin the law practice by placing $2,000 in a bank account established for the business.
- Purchased a law library for $900 cash.
- Purchased office supplies for $400 on credit.
- Accepted $500 in cash for completing a contract.
- Billed clients $1,950 for services rendered during the month.
- Paid $200 of the amount owned for office supplies.
- Received $1,250 in cash from one client who had been billed previously for services rendered.
- Paid rent expense for the month in the amount of $1,200.
- Withdrew $400 from the practice for personal use.
Required:
Show the effect of each of these transactions on the balance sheet equation by completing a table similar to the Exhibit below. Identify each owner’s equity transaction.
