One sale, two dates and a balanced but incomplete ledger
A fictional design workshop uses the accrual teaching model specified for this exercise. Its owner contributes five thousand currency units to the business bank account. The workshop purchases equipment for three thousand cash, capitalizing the equipment with no immediate depreciation in the exercise. It then completes a design service worth eight hundred on credit. The customer pays the full amount the following month. An inexperienced clerk records the sale correctly when the service is completed but credits sales revenue again when the customer pays. A separate cash expense is omitted from both sides of the records, so the trial balance still appears to agree. The owner wants to treat every bank receipt as revenue and believes equal trial-balance totals prove complete accuracy. No tax, inventory, loan or jurisdiction-specific reporting issue is supplied.
1. Explain the owner contribution, equipment purchase and customer collection without duplicating revenue.
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The contribution increases bank and owner capital. Equipment purchase increases equipment and reduces bank by 3,000. The earned credit sale creates a receivable and revenue 800; later collection increases bank and reduces that receivable, without a second sale.
2. Explain what the balanced trial balance does and does not prove.
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Agreement shows the recorded debit and credit totals balance arithmetically. It does not prove completeness or correct classification: an entire omitted expense and an equal-but-wrong revenue posting can leave the totals balanced.