Question
Tidewell Laundry Ltd is starting up. Its first three transactions in March 2026 are:
- Mar 1 — the owners invest $20,000 in cash in exchange for shares.
- Mar 4 — Tidewell buys washing machines for $6,000 on credit.
- Mar 9 — Tidewell washes and delivers a hotel’s linen and is paid $1,500 in cash.
Required: for each transaction, show its effect on the elements of the financial statements. Then give Tidewell’s total equity after all three.
Statements in this challenge
- Mar 1 — Owners InvestStatement Impact
- Mar 4 — Credit PurchaseStatement Impact
- Mar 9 — Cash SaleStatement Impact
- Total EquityNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — Presentation of Financial Statements
Work the cycle in its fixed order: journalise, post to the ledger, extract an unadjusted trial balance, pass adjusting entries, extract an adjusted trial balance, prepare the statements, then close the temporary accounts. Each step consumes the output of the one before it, so an error early on propagates all the way to the closing entries rather than staying local.
Common mistakes
- Preparing the financial statements from the unadjusted trial balance instead of the adjusted one.
- Closing permanent accounts — assets, liabilities and capital carry forward; only revenue, expense and drawings/dividends close.
- Forgetting that the post-closing trial balance should contain no income statement accounts at all.
Further readingIAS 1: what goes where in a full set of statements