Barth Interior provides decorating advice to its clients. Three recent transactions of the company include: a. Providing decorating services of $500 on account to one of its clients.
b. Paying $1,200 for an employee's salary in the current period.
c. Purchasing office equipment for $2,700 by paying cash.
Required: Write a memo to your instructor describing each step of the six-step measurement process presented in Illustration 2-1 in the book specifically for each of the three transactions. To emphasize, your memo should be specific to the three transactions indicated above..

Memo Describing Each Step of the Six-Step Measurement Process

To: Ms. Teagantigan, PhD, Financial Accounting

From: Okwukwe Faith, Financial Accounting Student

Subject: The Six-Step Measurement Process

Date: October 11, 2020

Find below the description you requested on the above subject.

1st Step: Identifying the accounts involved using the source documents:

For the provision of decorating services of $500 to a client, the invoice for the service will be reviewed for the accounts involved in the transaction.  It will show that Accounts receivable and Service Revenue are involved.  A review of the payroll check will also show the payment of salary to an employee, in which Cash Account and Salaries Expense account are involved.  Similarly, a review of the purchasing invoice will show that Office Equipment and Cash Account are involved for the purchase of equipment.

2nd Step: Analysis of the impact on the accounting equation: For a) Accounts Receivable and Service Revenue will increase by $500 respectively.  Cash Account will decrease while Salaries Expense account will increase by $1,200 for b).  For c) Office Equipment will increase and Cash will decrease by $2,700.

3rd Step: Assessing the accounts to be debited or credited:  For a) Accounts Receivable will be debited and Service Revenue credited.  For b) Salaries Expense will be debited and Cash credited.  For c) Office Equipment will be debited and Cash credited.

4th Step: With the above identification, the journal will be recorded for transactions a - c as detailed above.

5th Step: The above transactions will then be posted to the general ledger in their respective accounts.

6th Step: At the end of the period, the accounts will be balance and a list of balances extracted in the Trial Balance.

I hope I have understood the steps enough.

Regards,

Okwukwe Faith

Explanation:

We have detailed above the six-step measurement process for evaluating business transactions and events.  These steps help to identify the accounts involved in each business event and determine how the events are recorded in the accounting books.