On October 02, 2023, Mekdes, established her own consultancy business.
She named her business
"Kangaro Consultancy Services". The objective of the business is to render financial consultancy
services to clients on a fee basis. Below are business activities occurred during the first month of
operation of the firm (2 to 31 of October, 2023).
1. Oct. 2 - Mekdes, deposited Br. 200,000 cash in a bank account in the name of her business –
Kangaro Consultancy.
2. Oct. 5 - Mekdes transferred Equipment worth Br. 30,000 from her home for office uses by
Kangaro Consultancy Services.
3. Oct. 6 - Kangaro Consultancy Services, purchased Office Supplies worth Br. 7,000 from
various suppliers agreeing to pay the sum within two weeks.
4. Oct. 9 - Kangaro Consultancy received Br. 25,000 Cash for consultancy services it rendered to
a Cash client.
5. Oct. 12 - Kangaro Consultancy paid Br. 3,000 cash for advertising aired through ARTS TV.
6. Oct. 18 - Kangaro Consultancy received Br. 10,000 additional cash investment from its
owner.
7. Oct. 22 - Kangaro Consultancy rendered consultancy services worth Br. 15,000 to clients who
promised to pay the sum within a month.
8. Oct. 25 - Kangaro Consultancy collected Br. 5,000 cash from clients who received services.
9. Oct. 25- Kangaro Consultancy paid Br. 2,000 cash to suppliers on account.
10. Oct. 26 - Kangaro Consultancy purchased a used Vehicle for business purposes. The business
paid Br. 8,000 cash.
11. Oct. 27 - Kangaro Consultancy borrowed Br. 4,000 Cash from Birhan Bank. The loan is
repayable over ten months.
12. Oct. 29 - incurred and paid for the following expenses
Wages................................................. Br. 6,000
Utilities................................................ 1,200
Miscellaneous …............................... 800
Rent.................................................... 4,500
13. Oct. 31 - Kangaro Consultancy determined that cost of Office Supplies unconsumed on hand
at the end of the current month total Br. 1,300.
14. Oct. 31 - Kangaro Consultancy paid to the owner Br. 5,000 cash to pay house utility
expenses.
Required:
A) Analyze and record the above events in the financial records of Kangaro Consultancy
Services
B) Prepare Financial Statements for the business for the month of October 31, 2023.
A) Analyzing and Recording the Events in the Financial Records of Kangaro Consultancy Services:
1. Oct. 2 - Mekdes deposited Br. 200,000 cash in a bank account:
**Journal Entry:**
**Cash** 200,000
**Owner's Equity** 200,000
2. Oct. 5 - Transferred Equipment worth Br. 30,000 from home:
**Journal Entry:**
**Office Equipment** 30,000
**Owner's Equity** 30,000
3. Oct. 6 - Purchased Office Supplies worth Br. 7,000 on credit:
**Journal Entry:**
**Office Supplies** 7,000
**Accounts Payable** 7,000
4. Oct. 9 - Received Br. 25,000 cash from a client for services:
**Journal Entry:**
**Cash** 25,000
**Service Revenue** 25,000
5. Oct. 12 - Paid Br. 3,000 cash for advertising:
**Journal Entry:**
**Advertising Expense** 3,000
**Cash** 3,000
6. Oct. 18 - Received Br. 10,000 cash from owner as an additional investment:
**Journal Entry:**
**Cash** 10,000
**Owner's Equity** 10,000
7. Oct. 22 - Rendered services worth Br. 15,000 on credit:
**Journal Entry:**
**Accounts Receivable** 15,000
**Service Revenue** 15,000
8. Oct. 25 - Collected Br. 5,000 cash from clients for services rendered:
**Journal Entry:**
**Cash** 5,000
**Accounts Receivable** 5,000
9. Oct. 25 - Paid Br. 2,000 cash to suppliers on account:
**Journal Entry:**
**Accounts Payable** 2,000
**Cash** 2,000
10. Oct. 26 - Purchased a used Vehicle for business for Br. 8,000 cash:
**Journal Entry:**
**Vehicle** 8,000
**Cash** 8,000
11. Oct. 27 - Borrowed Br. 4,000 Cash from Birhan Bank:
**Journal Entry:**
**Cash** 4,000
**Notes Payable** 4,000
12. Oct. 29 - Paid for various expenses:
**Journal Entry:**
**Wages Expense** 6,000
**Utilities Expense** 1,200
**Miscellaneous Expense** 800
**Rent Expense** 4,500
**Cash** 12,500
13. Oct. 31 - Recognized unconsumed Office Supplies:
**Journal Entry:**
**Office Supplies Expense** 1,300
**Office Supplies** 1,300
14. Oct. 31 - Paid Br. 5,000 to owner for house utility expenses:
**Journal Entry:**
**Owner's Drawings** 5,000
**Cash** 5,000
B) Prepare Financial Statements for Kangaro Consultancy Services for the month of October 31,
2023:
**Income Statement:**
```
Service Revenue 40,000
Less: Expenses
Advertising Expense 3,000
Wages Expense 6,000
Utilities Expense 1,200
Miscellaneous Expense 800
Rent Expense 4,500
Office Supplies Expense 1,300
Total Expenses 16,800
Net Income 23,200
```
**Statement of Owner's Equity:**
```
Owner's Equity, Oct. 2 -
Add: Additional Investment 10,000
Less: Drawings 5,000
Net Income 23,200
Owner's Equity, Oct. 31 28,200
```
**Balance Sheet:**
```
Assets
Cash 125,200
Accounts Receivable 10,000
Office Supplies 5,700
Office Equipment 30,000
Vehicle 8,000
Total Assets 178,900
Liabilities
Accounts Payable 9,000
Notes Payable 4,000
Total Liabilities 13,000
Owner's Equity 28,200
Total Liabilities and Owner's Equity 178,900
```
**Cash Flow Statement:**
```
Operating Activities:
Net Income 23,200
Adjustments for:
Changes in Accounts Receivable (10,000)
Changes in Accounts Payable 2,000
Changes in Office Supplies (1,300)
Net Cash from Operating Activities: 13,900
Investing Activities:
Purchase of Office Equipment (30,000)
Purchase of Vehicle (8,000)
Net Cash from Investing Activities: (38,000)
Financing Activities:
Additional Investment 10,000
Borrowing from Bank 4,000
Drawings by Owner (5,000)
Net Cash from Financing Activities: 9,000
Net Increase in Cash (15,100)
Cash at Beginning of Month 200,000
Cash at End of Month 184,900
```
**Financial Ratios:**
- **Profit Margin:** (Net Income / Revenue) x 100
Profit Margin = (23,200 / 40,000) x 100 = 58%
- **Return on Investment (ROI):** (Net Income / Investment) x 100
ROI = (23,200 / 210,000) x 100 = 11.05%
- **Current Ratio:** Current Assets / Current Liabilities
Current Assets = 125,200 + 10,000 + 5,700 = 140,900
Current Liabilities = 9,000 + 4,000 = 13,000
Current Ratio = 140,900 / 13,000 = 10.84
These additional financial statements and ratios provide a more detailed overview of Kangaro
Consultancy Services' financial performance for the month of October 31, 2023.
