ABC Delivery Service had the following transactions in June: Earned $4 000 cash for services rendered; collected $2 500 from a customer 'on account;' paid out $200 cash for plumbing services; received $3 500 of supplies and promised to pay one month later; paid out $1 000 in cash drawings to the owner. What is the combined effect on Owner's capital of the June transactions?

Question

Quizplus · Accepted Answer

The owner's capital increases by $4,000 from services rendered and $2,500 from collection on account, totaling $6,500. It decreases by $200 for plumbing services and $1,000 for owner's drawings, totaling $1,200. The net effect is an increase of $5,300 - $1,200 = $4,100. However, the correct calculation should consider only the net income effect, which is $4,000 (services) - $200 (expenses) = $3,800, and the collection on account does not affect capital. Thus, the correct net effect is an increase of $2,800.

ABC Delivery Service Had the Following Transactions in June: Earned