Question

Latasha Jones decided to go into business for herself. As a talented Web designer, she decided to open a small consulting firm with $5,000 of her own money, for which she received common stock. Latasha borrowed $500 from her best friend to help get the business started, and in exchange, she gave her friend an I-owe-you (IOU). The company bought a state-of-the-art desktop computer, complete with the accessories and software needed to get the business off the ground, at a total cost of $6,000. The business required a separate phone line, which cost $450. Then, the company put an advertisement in the local newspaper, at a cost of $45 per month for weekly ads. The company was ready to go. There are 5 transactions and all of the payments were cash.

Answer 1

Answer:

Operating transactions are those that have to do with the normal day to day operations of the business such as expenses and revenue.

Investing activities have to do with transactions involving capital goods(fixed assets) as well as investments into the securities of other businesses.

Financing activities concern the provision of capital to the business to finance operations. It involves equity and debt.

FINANCING TRANSACTONS

1. $5,000 used to open the Consulting firm from Latasha's own money.

2. $500 borrowed from her best friend.

INVESTING TRANSACTIONS

1. $6,000 spent on state-of-the-art desktop computer (fixed asset).

OPERATING TRANSACTIONS.

1. Separate phone line which cost $450.

2. Advertisement in local newspaper of $45.