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Expanded Accounting Equation: Service Firm Public Limited Company

Arjun EP

Published on: September 17, 2020

Service Providing Firm and Accounting Equation

Service provider provides different services like legal, real estate, communications, storage, processing etc.

Service providers do not sell products; therefore, there are not:

Purchase of goods and purchase return.

Sales of goods and sales return.

Suppliers or creditors.

Discount received and discount allowed.

Types of service providers:

Application service provider

Audit service provider

Cleaning service provider

Cloud storage service provider

Commission based service provider

Cyber security service provider

Data storage service provider

Gardening service provider

Internet service provider

Legal service provider

Management service provider

Motivation service provider

Network service provider

Online service provider

Payment service provider

Pest control service provider

Security service provider

Software service provider

Software service provider in cloud computing

Taxation service

Telecommunications service provider

Website development service provider

Website hosting and domain provider etc.

PROBLEM: 10 Service Firm Shareholders’ Equity

EP Online Study LLC has the following transaction for the month of March:

(a) Invested Rs 200,000 to start a business and converted into 20,000 common stock @ Rs 10.

(b) Purchases office equipment on account for Rs 35,000, payment due within the month.

(d) Provides bill of Rs 55,000 for services to a customer and bill received.

(e) Pays Rs 3,000 utility bills (electricity, internet and mobile expenses) with cash.

(f) Distributed Rs 1,000 cash in dividends to stockholders.

(g) Insurance for one year is Rs 600 which includes advance insurance Rs 550.

(h) Salary paid to assistant Rs 3,000 and still payable Rs 1,000.

Required: Accounting equation in expended form

[Answer: Assets = 232,400; 35,000; 55,000; 550;

SHE = 200,000; RE = 46,950; Liabilities = 35,000; 40,000; 1,000]

SOLUTION

Accounting Equation

Particulars		ASSETS							=	SH EQUITY			+	LIABILITIES
		Cash	+	Equip	+	A/R	+	Adv		Capital	+	RE		A/P	+	Adv Rev	+	Payable
a	Invested into business	200,000		0		0		0	=	200,000		0	+	0		0		0
	First equation	200,000	+	+0	+	0	+	0	=	200,000	+	0		0	+	0	+	0
b	Office equipment (credit)	0		+35,000		0				0		0		+35,000		0		0
	New equation	200,000	+	35,000	+	0	+	0	=	200,000	+	0	+	35,000	+	0	+	0
c	Service revenue (in advance)	+40,000		0		0				0		0		0		+40,000		0
	New equation	240,000	+	35,000	+	0	+	0	=	200,000	+	0	+	35,000	+	40,000	+	0
d	Service provided on credit	0		0		+55,000				0		+55,000		0		0		0
	New equation	240,000	+	35,000	+	55,000	+	0	=	200,000	+	55,000	+	35,000	+	40,000	+	0
e	Utility bill paid	-3,000		0		0				0		–3,000		0		0		0
	New equation	237,000	+	35,000	+	55,000	+	0	=	200,000	+	52,000	+	35,000	+	40,000	+	0
f	Dividend distributed	-1,000		0		0				0		-1,000		0		0		0
	New equation	236,000	+	35,000	+	55,000	+		=	200,000	+	51,000	+	35,000	+	40,000	+	0
g	Insurance and advance	(600)		0		0		550		0		(50)		0		0		0
	New equation	235,400	+	35,000	+	55,000	+	550	=	200,000	+	50,950	+	35,000	+	40,000	+	0
h	Salary paid and still payable	(3,000)		0		0		0		0		(4,000)		0		0		1,000
	Final equation	232,400	+	35,000	+	55,000	+	550	=	200,000	+	46,950	+	35,000	+	40,000	+	1,000

Keep in mind

All incomes, expenses, profit and loss are adjusted in retained earnings (RE) in limited company.

Other rules are same as Expanded Accounting Equation: Service Firm Sole Proprietorship

For more details click here:

https://eponlinestudy.com/expanded-accounting-equation-service-firm-sole-proprietorships/

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Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
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Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz