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Goal: Ch 1, Cash-basis vs. accrual-basis transaction analysis (pp. 15-19, 100-101). 1. Consider how shareholder contributions of $100,000 (to form the corporation) affect the following
Goal: Ch 1, Cash-basis vs. accrual-basis transaction analysis (pp. 15-19, 100-101).
1. Consider how shareholder contributions of $100,000 (to form the corporation) affect the following cash- and accrual-basis accounting equations, respectively:
Cash-Basis
Assets/Resources
=
Claims against Resources
Cash
=
Contributed Capital
+
Earned Capital
=
Accrual-Basis
Assets/Resources
=
Claims against Resources
Cash
Inventory
=
Liabilities
+
Shareholders Equity
Cash
Inventory
=
Liabilities
+
Contributed Capital
+
Earned Capital
Cash
Inventory
=
Accounts Payable
+
Contributed Capital
+
Revenues
Expenses
=
2. In addition to the previous transaction, assume that the corporation purchases inventory for $10,000 on credit, then immediately sells $8,000 of the inventory to customers for $12,000 cash. How do these transactions affect the cash- and accrual-basis accounting equations?
Cash-Basis
Transaction Description
Resources
=
Claims against Resources
Assets
=
Contributed Capital
+
Earned Capital
Cash
=
Contributed Capital
+
Revenues (+)
Expenses ()
Owner contribution
=
Inventory purchase
=
Sale of inventory
=
Totals
=
Accrual-Basis
Transaction Description
Resources
=
Claims against Resources
Assets
=
Liabilities
+
Contributed Capital
+
Earned Capital
Cash
Inventory
=
Accounts Payable
+
Contributed Capital
+
Revenues (+)
Expenses (-)
Owner contribution
=
Inventory purchase
=
Sale of inventory
=
Totals
=
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Financial Accounting
Authors: David Spiceland
6th Edition
1260786528, 9781260786521
