The first step in the accounting cycle boils down to identifying if and how transactions and events in the real story of business should be reported in the financial statements (i.e., recognition and measurement!). For this, we use the accounting model. Transactions for the month: 1. Issued common stock in exchange for $30,000 in cash and a $4,000 computer. 2. Paid $10,000 rent for the next three months. 3. Borrowed $4,000 on a note payable. 4. Purchased $700 supplies for cash.

5. Purchased $5,000 inventory on account. 6. Sold $2,000 of inventory on account for $3,000. 7. Paid employees $3,000 in wages for the current month. 8. Collected cash from customers for the sale under 6. 9. Received utilities bill for the current month: $1200. 10. Received $500 advance from customer. 11. Paid dividends of $100.