EXAMPLE OF BUSINESS TRANSACTIONS AND IMPACT ON ACCOUNTS

After graduating from post-secondary, you decide to open up your own snow removal business
(Mr Plow). Below are the events for your first month of operations in December.

DATE EVENT
a) 1-Dec Opened a business chequing account and deposited $5,000 from personal sources.
Obtained bank loan of $30,000 and deposited proceeds to business chequing
b) 2-Dec
account.
c) 4-Dec Purchased snow removal equipment for $20,000 using cash from bank account.
Signed a contract with a customer. They provided a deposit of $3,000 cash. You'll
d) 7-Dec
start providing services to this customer next month.

Signed a lease agreement for a shop to store your new equipment. You paid $1,500.
e) 8-Dec
The monthly rent is $500.
f) 10-Dec Provided snow removal services for a customer and they paid $2,000 cash.
Provided snow removal services for a customer on credit. They'll pay $1,500 next
g) 15-Dec
month.
Equipment was damaged as a result of hitting a big rock. Took it into a repair shop
h) 20-Dec
and incurred a $800 expense to fix it. You'll pay the repair shop next month.
i) 31-Dec Incurred a total of $200 in fuel costs for equipment. Paid for with cash.
Hired an employee in the month to perform some of the work. Incurred $500 in
j) 31-Dec
salary costs and paid with cash.

A new potential customer asked for a quote on services. You prepared a quote that
k) 31-Dec the monthly fee to keep their parking lot cleared would be $1,000 per month. The
customer is still deciding on whether to accept the quote.

Made $600 payment to bank for business loan. Assume $200 related to interest
l) 31-Dec expense. Of the ending loan balance, assume 20% is a current liability and the
remaining 80% is non-current.

Chart of Accounts:
Cash
ASSETS

Prepaid Expenses
Accounts Receivable
Snow Removal Equipment

Accounts Payable
LIAB

Bank Loan Payable

Unearned Revenue

Your Name, Capital

Snow Removal Revenue
Rent Expense
EQUITY

Repairs and Maintenance Expense

Fuel Expense
Salaries Expense
Interest Expense

REQUIRED:
a) Prepare a summary table of how each event will impact the accounts.
b) Using the summary table, prepare an Income Stmt, Stmt of Changes in Equity, and
Balance Sheet
 SUMMARY TABLE

ASSETS = LIABILITIES + EQUITY

Cash Prepaid Exp Acct Rec SN Equip Acct Pay Bank Loan Unearned Rev Your Name, Cap
Beg Bal $0 $0 $0 $0 $0 $0 $0 $0
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
End Bal $0 $0 $0 $0 $0 $0 $0 $0

TOTAL ASSETS =
TOTAL LIABILITIES & EQUITY =

Mr Plow
Income Statement
For the Month Ended December

Revenue
Expenses:
Rent Expense
R&M Expense
Fuel Expense
Salaries Expense
Interest Expense
Net Income (Loss)

Mr Plow
Statement of Changes in Equity
For the Month Ended December

Beginning Balance
Owner Contributions
Owner Withdrawals
Net Income (Loss)
Ending Balance
Mr Plow
Balance Sheet
Month of December

ASSETS
Current Assets
Cash
Prepaid Expenses
Accounts Receivable
Total Current Assets

Property, Plant, and Equipment

Snow Removal Equipment

TOTAL ASSETS

LIABILITIES
Current Liabilities
Accounts Payable
Unearned Revenue
Current Portion of Loan Payable
Total Current Liabilities

Non-Current Liabilities
Loan Payable

TOTAL LIABILITIES

EQUITY
Your Name, Capital

TOTAL LIABILITIES AND EQUITY

 SUMMARY TABLE

ASSETS = LIABILITIES +
Cash Prepaid Exp Acct Rec SN Equip Acct Pay Bank Loan
Beg Bal $0 $0 $0 $0 $0 $0
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
End Bal $0 $0 $0 $0 $0 $0

TOTAL ASSETS = $0
TOTAL LIABILITIES & EQUITY = $0
BILITIES + EQUITY
Unearned Rev Your Name, Cap
$0 $0

$0 $0
 SUMMARY TABLE

ASSETS = LIABILITIES + EQUITY

Cash Prepaid Exp Acct Rec SN Equip Acct Pay Bank Loan Unearned Rev Your Name, Cap
Beg Bal $0 $0 $0 $0 $0 $0 $0 $0
a) $5,000 $5,000 Owner Contrib
b) $30,000 $30,000
c) -$20,000 $20,000
d) $3,000 $3,000
e) -$1,500 $1,000 -$500 Rent Expense
f) $2,000 $2,000 Revenue
g) $1,500 $1,500 Revenue
h) $800 -$800 R&M Exp
i) -$200 -$200 Fuel Exp
j) -$500 -$500 Salary Exp
k) No transaction
l) -$600 -$400 -$200 Loan Pmt w/Interest
End Bal $17,200 $1,000 $1,500 $20,000 $800 $29,600 $3,000 $6,300

TOTAL ASSETS = $39,700

TOTAL LIABILITIES & EQUITY = $39,700

Mr Plow
Income Statement
For the Month Ended December

Revenue $3,500
Expenses:
Rent Expense $500
R&M Expense 800
Fuel Expense 200
Salaries Expense 500
Interest Expense 200 2,200
Net Income (Loss) $1,300

Mr Plow
Statement of Changes in Equity
For the Month Ended December

Beginning Balance $0
Owner Contributions 5,000
Owner Withdrawals 0
Net Income (Loss) 1,300
Ending Balance $6,300
Mr Plow
Balance Sheet
Month of December

ASSETS
Current Assets
Cash $17,200
Prepaid Expenses $1,000
Accounts Receivable $1,500
Total Current Assets $19,700

Property, Plant, and Equipment

Snow Removal Equipment $20,000

TOTAL ASSETS $39,700

LIABILITIES
Current Liabilities
Accounts Payable $800
Unearned Revenue 3,000
Current Portion of Loan Payable 5,920
Total Current Liabilities $9,720

Non-Current Liabilities
Loan Payable 23,680

TOTAL LIABILITIES $33,400

EQUITY
Your Name, Capital 6,300

TOTAL LIABILITIES AND EQUITY $39,700