Analyze and record the above events in the financial records

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Reference no: EM133369404

Case: On January 3, 2003, Ale Hab, an ex-manager of the CBE Bole Branch, established his own consultancy business. He named his business "AH Consultancy Services". The objective of the business is to render financial consultancy services to clients on a fee basis. Below are business activities occurred during the first month of operation of the firm (3 to 31 of January, 2003).

a. Alemu deposited $20,000 cash in a bank account in the name of his business - AH Consultancy Services (Deposit slip # 1). He has $250,000 cash in his personal bank account with Dashen Bank and $50,000 cash in a safe deposit box at home.

b. Alemu transferred furniture worth $30,000 from his home for office uses by AH Consultancy Services (Asset receipt note #1). He also has extra home furniture, residential house and personal car worth $620,000, $800,000 and $360,000, respectively.

c. Alemu purchased office supplies worth $5,000 from various suppliers agreeing to pay the sum within two weeks (Purchase invoice #1). Two-fifth of the supplies will be used for personal purposes while the remaining is for use by AH. Three-fifth of the liability is arranged to be settled from business cash sources.

d. AH received $20,000 cash for consultancy services it rendered to a cash client (Cash sales invoice #1).

e. AH paid $3,000 cash for advertising aired through ETV (Cash payment voucher #1).

f. AH forecasted that services fees in the next two weeks will amount to $5,000.

g. AH received $10,000 additional cash investment from its owner (Cash receipt note #1).

h. AH rendered consultancy services worth $15,000 to clients who promised to pay the sum within a month (Credit sales invoice #1).

i. AH sold one of the furniture invested by its owner for $5,000 cash (Cash receipt note #2). The furniture had a recorded value of $5,000.

j. AH collected $5,000 cash from clients who received services in item-8 above (Cash receipt note #3).

k. AH paid $2,000 cash to suppliers on credit (Cash payment voucher #2).

l. AH purchased a used car for business purposes. The business paid $8,000 cash for the car (Cash payment voucher #3). Brokers estimated that the car currently worth only $5,000 and the Inland Revenue assessed the car at $12,000 for property tax purposes.

m. AH borrowed $4,000 cash from Dashen Bank (Cash receipt note #4). The loan is repayable over ten months.

n. AH employed an accountant and a secretary for monthly salary of $1,200 and $700, respectively (Employment contract #2 and #4).

o. AH incurred and paid for the following expenses(Cash payment voucher #4)
• Wages................................................. $6,000
• Rent.................................................... 4,500
• Utilities................................................ 1,200
• Others.................................................. 800

p. AH determined that cost of supplies remained on hand at the end of the current month total $1,300 (Supplies inventory report #1).

q. AH paid $450 cash to Dashen Bank consisting of $400 principal and $50 one month interest on part of the loan due in January (Cash payment voucher #5).

r. AH paid its owner $5,000 cash to pay house utility expenses (Cash payment voucher #6).

Required:

Question 1: Analyze and record the above events in the financial records of AH Consultancy Services

Question 2: And prepare financial statements for the business for the month of January 2003.

Reference no: EM133369404

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