Summary of the transactions, Financial Statement

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Problem: WOW Momo started selling momo of various flavors on January 1, 2019. Listed below are the
transactions that occurred in WOW Momo during the month of January:
i. Started business by investing £20,000 in cash.
ii. Purchased equipment worth of £6,000 by cash to make momo.
iii. During the month WOW Momo sold momo worth of £3200.
iv. Paid rent of £300 for the month of January in cash.
v. Sold momo worth of £450 to a regular official client, on account.
vi. Paid restaurant staffs’ monthly salary of £1,800 in cash.
vii. The owner of WOW Momo withdrew £1,200 cash from the business for personal use.
viii. Utility (electricity) bills of £500 incurred, on account.
ix. Advertising cost amounting to £200 was paid in cash.
x. Collected £450 from clients previously billed (refer to V).
a. Prepare a tabular analysis of WOW Momo’s transactions of the month of January with the aid of the
Accounting Equation.
b. Prepare the Financial Statements for WOW Momo for the month ending January 31, 2019. [Prepare all
the Financial Statements except for Statement of Cashflow]
Solution:
(a) WOW Momo
Summary of Transactions
For the Month Ended January 31,2019
Asset = Liabilities + Owner’s Equity
Trans- Account Account Owner’s Owner’s
action Cash + Receivable + Equipment = Payable + Capital + Revenue – Drawings - Expense
(1) +£20,000 +£20,000
(2) -£6,000 +£6,000
(3) +£3,200 +£3,200
(4) -£300 -£300
(5) +£450 +£450
(6) -£1,800 -£1,800
(7) -£1,200 -£1,200
(8) +£500 -£500
(9) -£200 -£200
(10) +£450 -£450
£14,150 + £0 + £6,000 = £500 + £20,000 + £3,650 - £1,200 - £2,800
£20,150 £20,150

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(b) FINANCIAL STATEMENT
WOW Momo
Income Statement
For the Month Ended January 31,2019
Revenues:
Sales Revenue: (£3,200+£450) £3,650
Less: Expenses:
Salary Expense (£1,800)
Rent Expense (£300)
Advertising Expense (£200)
Utility Expense (£500)
Total Expenses (£2800)
Net Income/ Profit £850
WOW Momo
Owner’s Equity Statement
For the Month Ended January 31,2019
Capital January 1:
Investment £20,000
Add: Net Income/ Profit £850
£20,850
Less: Drawings (£1,200)
Owner’s Equity January 31 £19,650

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WOW Momo
Balance Sheet Statement
For the Month Ended January 31,2019
Assets
Non-Current Assets:
Equipment £6,000
Current Assets:
Cash £14,150
Accounts Receivables £0
Total Assets £ 20,150
Liabilities and Owner’s Equity
Liabilities:
Accounts Payable £500
Total Liabilities £500
Owner’s Equity:
Owner’s Capital January 31 £19,650
Total Liabilities and Owner’s Equity £ 20,150