Jean Howard established an insurance agency on july 1 of thecurrent year and completed the following transactions duringjuly:
a. Opened a business bank account with a deposit of $50,000from personal funds.
b. Purchased supplies on account, $1,600.
c. Paid creditors on account, $500.
d. Received cash from fees earned on insurance commissions,$9,250.
e. Paid rent on office and equipment for the month,$2,500.
f. Paid automobile expenses for month, $900, and miscellaneousexpenses, $300.
g. Paid office salaries, $1,900.
h. Determined that the cost of supplies on hand was $550;therefore, the cost of supplies used was $1,050.
i. Billed insurance companies for sales commissions earned,$11,150.
j. Withdrew cash for personal use, $2,700.
Instructions
1. Indicate the effect of each transaction and the balancesafter each transaction, using the following tabular headings:
Assets = Liabilities+ Owner'sEquity
Cash + Accounts Receivable + Supplies = Accounts Payable +Jean Howard, Capital - Jean Howard, Drawing + Fees Earned - RentExpense - Salaries Expense - Supplies Expense - Auto Expense -Miscellaneous Expense
2. Briefly explain why the owner's investment and revenuesincreased owner's equity, while withdrawals and expenses decreasedowner's equity.