Suppose a small business keeps just the following eight accounts.
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Cash |
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Liability for Unpaid Expenses |
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Inventory |
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Notes Payable |
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Cost of Goods Sold Expense |
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Owner’s Equity |
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Operating Expenses |
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Sales Revenue |
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The business’s transactions during the year include:
a. Made sales during the year for $2,400 (all were cash sales)
b. The cost of goods sold during the year was $1,600
c. Incurred $425 in operating expenses, which will be paid sometime later
d. Borrowed $10,000 from bank (ignore the interest expense on this note)
e. Cut a check for $275 in payment of operating expenses; these particular expenses are recorded as paid and haven’t been recorded previously in a liability account.
How should these transactions be recorded in the business’s accounts?