Transaction analysis and preparation of financial statements Flashy Fashions Ltd is a small company in a coastal town. It rents its premises and its sales are all on credit. It has only three expenses: cost of goods sold, rent and income tax.

At the end of its previous financial year, 30 September 2021, Flashy’s balance sheet was as follows:

FLASHY FASHIONS LTD BALANCE SHEET AS AT 30 SEPTEMBER 2021 Assets $ Liabilities and shareholders’ equity $

Current assets Current liabilities Cash 800 Accounts payable 600 Accounts receivable 400 Rent payable 700 Inventory 900 Shareholders’ equity Share capital 300 Retained profits 500 Total assets 2 100 Total liabilities and shareholders’ equity 2 100 During the year ended 30 September 2022, the following information was recorded in the company’s accounts.

a Revenue from credit sales $10 000.

b Collections from customers $9600.

c Purchases on credit of inventory for sale $6100.

d Payments to suppliers $6300.

e Cost of goods sold $6400.

f Rent charged by the landlord $2400.

g Rent paid to the landlord $2900 (decreasing the liability).

h Income tax payable for the year $350.

i Cash dividends declared and paid to shareholders $450.

Required:

1 Prepare transaction analysis for each of the items a–i.

2 Prepare an income statement and a balance sheet.