Accounting Skills - Case Study
Let’s assume that David, a web designer, after working for many years with IT companies, has recently started a new web design company to provide website design and other related services to local businesses in his location. The company is named “Web Design Inc.”
Running a web design company can pose many challenges. You need to get involved in all the aspects of the business, including renting the place, setting up the infrastructure, buying the required software, recruiting trained staff, marketing and promoting your business, and most importantly managing their finances.
In the following lectures, we will use various transactions at Web Design Inc. to explain the various concepts of accounting.
This article provides a summarized version of these transactions and their impact on the financial statements. It is recommended that you print a copy of this document and keep it handy while reviewing the lectures.
Assumptions:
- The business was started on June 1, 2012.
- The business follows the accounting period April 1, 2012 to March 31, 2013.
- David has rented a place for work and the first rent payment will be due on the 5th day of the following month.
Transactions at Web Design Inc.
| S. No. | Date | Transaction |
| Transaction 1 | June 1, 2012 | Invest Money in the BusinessLet’s start the case study from the very beginning of the business, when David started the business. The first transaction was when he invested his personal savings of $10,000 into the business. This becomes the capital for the business. The balance sheet will show $10,000 as the cash available and $10,000 as the owner’s equity. |
| Transaction 2 | June 5, 2012 | Buy a New LaptopThe first expenditure happens on June 5 when David buys a new Laptop for his work. The laptop costs him $800. |