Debit: 6,000 (Feb10) Balance = 6,000

Initial cash was 50,000 (Jan 1). After Feb transactions, cash is 1,000? That’s impossible because we had 55,000 after Jan. We must include beginning balances.

Error: Forgot to include the initial capital of $50,000 in the trial balance? Actually, we started with cash from capital. Let’s adjust:

| Date | Transaction | |------|-------------| | Feb 1 | Paid rent $1,500 cash. | | Feb 5 | Performed services for $4,000 cash. | | Feb 10 | Purchased equipment $6,000, paying $2,000 cash, rest on credit. | | Feb 18 | Billed a client for services $3,000 (to be paid later). | | Feb 25 | Collected $1,000 from that client. | | Feb 28 | Paid $500 of the accounts payable from Feb 10. |

But let’s recompute correctly: Revenues: Service Revenue = $22,200

1. Introduction Accounting is the language of business. The purpose of this report is to provide a structured set of solved exercises that demonstrate the fundamental recording process: from identifying transactions to preparing the four core financial statements. Each exercise includes a detailed solution, explanation, and T-accounts.

The loan of $20,000 was not in the asset side? Cash includes it. The real issue: The trial balance above was inconsistent. Let’s rebuild correctly in a real exercise. 6. Exercise 5: Closing Entries Using the corrected Income Statement (Net Income = $10,100), close the temporary accounts.