The Accounting Cycle

Mr. Smith started a new trading business. Based on the following transactions, complete the tasks below:

1. Mr. Smith invested $50,000 cash into the business.
2. Purchased office furniture for cash, $5,000.
3. Paid monthly rent, $2,000.

Tasks:

1. Apply the fundamental accounting equation (Assets=Liabilities+Capital) to show the effect of each of the three transactions.
2. Pass the necessary journal entries for all three transactions.
3. Post these specific entries into a “Cash Account” ledger and calculate the final closing cash balance.