This is an exercise on the relationships between assets, liabilities, and ownership equities. The numbers are small,

Question:

This is an exercise on the relationships between assets, liabilities, and ownership equities. The numbers are small, but the underlying concepts are large.
1. Assume an opening of
Cash ............. $1,000
Paid-in capital ......... $1,000
2. Purchase inventory for $600 cash. Prepare a A heading is unnecessary in this and subsequent requirements.
3. Sell the entire inventory for $850 cash. Prepare a What does retained earnings represent and how is it related to other accounts? Explain in your own words.
4. Buy inventory for $300 cash and equipment for $800 cash. Prepare a What does retained earnings represent and how is it related to other accounts? Explain in your own words.
5. Buy inventory for $500 on open account. Prepare a What do retained earnings and account payable represent and how are they related to other accounts? Explain in your own words. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...