Question
Silverbirch Studio, a photography business, opened on May 1, 2025. The following transactions took place in its first month.
| Date | Transaction |
|---|
| May 1 | The owner invested $20,000 cash in exchange for ordinary shares. |
| May 3 | Purchased camera equipment for $8,000 cash. |
| May 8 | Provided photography services for $3,500 cash. |
| May 14 | Paid the studio rent for May, $1,200. |
| May 19 | Provided photography services on account, $2,700. |
| May 26 | Collected $1,500 of the amount billed on May 19. |
| May 30 | Paid assistant salaries, $1,800. |
Instructions:
- Journalize the May transactions.
- Post to the Cash and Service Revenue accounts using the T-Account format, naming each posting after the other account involved, and balance both accounts off on May 31, 2025 (Balance c/d).
Statements in this challenge
- Journal EntriesJournal Entry
- T-AccountsLedger
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