Accounting equation help?
Question:
1. Moonlight issued shares of common stock to investors in exchange for $25,000 cash.
2. Moonlight used $2,500 cash to purchase supplies that will be entirely consumed in the the month of February.
3. A $500 utility bill for January is received on the last day of the month. Moonlight does not pay yet.
Use the accounting equation to record each of the transactions.
Have I done this correctly? Thanks for any and all help.
1. Cash + 25,000 Equity + 25,000
2. Cash - 2,500 Supplies + 2,500
3. Liabilities + 500 Equity - 500
Answer:
1. Moonlight issued shares of common stock to investors in exchange for $25,000 cash
The inflow of cash of $25,000 is balanced by the issue of equity of $25,000. (Dr Cash is balanced by Cr Equity)
2. Moonlight used $2,500 cash to purchase supplies that will be entirely consumed in the the month of February.
The outflow of cash of $2,500 is balanced by the purchase of supplies. (Dr Expenses (Supplies) is balanced by Cr Cash)
3. A $500 utility bill for January is received on the last day of the month. Moonlight does not pay yet
The utility services received is balanced by the amout owing to the utilities company. (Dr Expenses (Utilities), Cr Liabilities)
So you're correct for 1 and 2, but your no. 3 should be:
Utilities + 500, Liabilities + 500.
Utilities is an expense item, like the supplies in Q2.
i am not the person to ask on this
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