Transactions made by Orlando Carbrera & Co. , a law firm for the month of March

Question

Transactions made by Orlando Carbrera & Co. , a law firm for the month of March are shown below. Prepare a tabular analysis which shows the effects of these transactions on the expanded accounting equation. 1. The company provided $20,000 of servicwes for customers, on credit. 2. The company received $20,000 in cash from customers who had been billed for services (in transaction one) 3. The company received a bill for $2,000 of advertising, but will not pay it until a later date 4. Orlando Carbrera withdrew #$5,000 cash fromt he business for personal use.

Explanation / Answer

The company provided $20,000 of services for customers on account. Dr Accounts Receivable 20,000 (increase assets) Cr Service Revenue 20,000 (increase revenues, retained earnings, and equity) The company received $20,000 in cash from customers who had been billed for services [in transaction (1)]. Dr Cash 20,000 (increase assets) Cr Accounts Receivable 20,000 (decrease assets) The company received a bill for $2,000 of advertising, but will not pay it until a later date Dr Advertising Expense 2,000 (increase expenses. Decrease retained earnings and equity) Orlando Carbrera Co. paid a cash dividend of $5,000. Dr Retained Earnings 5,000 (decrease retained earnings and equity) Cr Cash 5,000 (decrease assets)

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