Professional Documents
Culture Documents
ANALYZING TRANSACTIONS
CLASS DISCUSSION QUESTIONS
1. An account is a form designed to record
changes in a particular asset, liability,
owner's equity, revenue, or expense. A
ledger is a group of related accounts.
2. The sequence of accounts in the ledger
corresponds generally to the sequence of
accounts as they appear in the balance
sheet, followed by the accounts as they
appear in the income statement.
3. The terms debit and credit may signify
either an increase or decrease, depending
upon the nature of the account. For
example, debits signify an increase in asset
and expense accounts but a decrease in
liability, owner's capital, and revenue
accounts.
4. Liabilities and owner's equity both have
rights or claims to assets as indicated by the
accounting equation, Assets = Liabilities +
Owner's Equity. Therefore, the same rules of
debit and credit apply to both liabilities and
owner's equity.
5. a. Decrease in owner's equity
b. Increase in expense
6. a. Increase in owner's equity
b. Increase in revenue
7. a. Assuming no errors have occurred, the
credit balance in the cash account
resulted from drawing checks for $900
in excess of the amount of cash on
deposit.
b. The $900 credit balance in the cash
account as of July 31 is a liability owed
to the bank. It is usually referred to as
an "overdraft" and should be classified
on the balance sheet as a liability.
8. e. Business transaction is authorized.
b. Business transaction occurs.
d. Business document is prepared.
c. Entry is recorded in journal.
a. Entry is posted to ledger.
9. a. The date, November 23, and the
amount, $3,020, are recorded in the
credit section of the fees earned
account.
EXERCISES
Ex. 21
Balance Sheet Accounts
Assets
Flight Equipment
Purchase Deposits
for Flight Equipment*
Spare Parts and Supplies
Liabilities
Accounts Payable
Air Traffic Liability**
Owner's Equity
None
*
**
***
****
Revenue
Cargo and Mail Revenue
Passenger Revenue
Expenses
Aircraft Fuel Expense
Commissions***
Landing Fees****
Ex. 22
Account
Number
21
12
11
41
31
32
13
53
52
51
Account
Accounts Payable
Accounts Receivable
Cash
Fees Earned
Kim Walks, Capital
Kim Walks, Drawing
Land
Miscellaneous Expense
Supplies Expense
Wages Expense
40
Ex. 23
Balance Sheet Accounts
1. Assets
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
2. Liabilities
Accounts Payable
Unearned Rent
3. Owner's Equity
Gerald Emerson, Capital
Gerald Emerson, Drawing
11
12
13
14
15
21
22
31
32
41
51
52
53
59
4. Revenue
Fees Earned
5. Expenses
Wages Expense
Rent Expense
Supplies Expense
Miscellaneous Expense
Note: The order of some of the accounts within the major classifications is
somewhat arbitrary, as in accounts 1314 and accounts 5153. In a new business,
the order of magnitude of balances in such accounts is not determinable in
advance. The magnitude may also vary from period to period.
Ex. 24
a. and b.
Account Debited
Transaction
Type
Account Credited
Effect
(1)
(2)
(3)
asset
asset
asset
+
+
+
(4)
(5)
(6)
(7)
(8)
(9)
expense
asset
liability
asset
drawing
expense
+
+
+
+
+
Type
owner's equity
asset
asset
liability
asset
revenue
asset
asset
asset
asset
41
Effect
+
Ex. 25
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Cash.......................................................................
Emmer Liu, Capital..........................................
30,000
Supplies.................................................................
Cash..................................................................
1,500
Equipment.............................................................
Accounts Payable...........................................
Cash..................................................................
30,000
Operating Expenses.............................................
Cash..................................................................
4,050
Accounts Receivable...........................................
Service Revenue..............................................
13,000
Accounts Payable.................................................
Cash..................................................................
7,500
Cash.......................................................................
Accounts Receivable......................................
9,500
3,000
Operating Expenses.............................................
Supplies...........................................................
1,050
30,000
1,500
20,000
10,000
4,050
13,000
7,500
9,500
3,000
1,050
Ex. 26
WORLD CO.
Trial Balance
April 30, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Equipment............................................................................
Accounts Payable................................................................
Emmer Liu, Capital..............................................................
Emmer Liu, Drawing............................................................
Service Revenue..................................................................
Operating Expenses............................................................
42
13,450
3,500
450
30,000
12,500
30,000
3,000
13,000
5,100
55,500
55,500
Ex. 27
1.
2.
3.
4.
5.
6.
7.
Ex. 28
a.
b.
c.
d.
Liabilitycredit
Assetdebit
Assetdebit
Owner's equity
(Craig Arant, Capital)credit
e. Owner's equity
(Craig Arant, Drawing)debit
f.
g.
h.
i.
j.
Assetdebit
Revenuecredit
Expensedebit
Expensedebit
Assetdebit
g.
h.
i.
j.
k.
l.
debit
debit
credit
credit
debit
debit
Ex. 29
a.
b.
c.
d.
e.
f.
debit
credit
debit
credit
credit
debit
Ex. 210
a. Debit (negative) balance of $3,500 ($7,500 $5,000 $6,000). Such a
negative balance means that the liabilities of Kristis business exceed the
assets.
b. Yes. The balance sheet prepared at December 31 will balance, with Kristi
Toohey, Capital, being reported in the owners equity section as a negative
$3,500.
43
Ex. 211
a. The increase of $17,800 in the cash account does not indicate earnings of
that amount. Earnings will represent the net change in all assets and
liabilities from operating transactions.
b. $8,500 ($26,300 $17,800)
Ex. 212
a. $11,550 ($3,850 + $11,850 $4,150)
b. $30,000 ($21,000 + $27,500 $18,500)
c. $13,800 ($60,500 $77,700 + $31,000)
Ex. 213
20
Mar. 1
2
4
6
8
12
20
25
30
31
31
Rent Expense........................................................
Cash..................................................................
2,500
Advertising Expense............................................
Cash..................................................................
600
Supplies.................................................................
Cash..................................................................
1,050
Office Equipment..................................................
Accounts Payable...........................................
4,500
Cash.......................................................................
Accounts Receivable......................................
3,600
Accounts Payable.................................................
Cash..................................................................
2,150
1,000
Miscellaneous Expense.......................................
Cash..................................................................
120
Utilities Expense...................................................
Cash..................................................................
195
Accounts Receivable...........................................
Fees Earned.....................................................
11,150
Utilities Expense...................................................
Cash..................................................................
280
44
2,500
600
1,050
4,500
3,600
2,150
1,000
120
195
11,150
280
Ex. 214
a.
JOURNAL
Date
2003
Nov. 12
Page 29
Post.
Ref.
Description
Supplies...................................................
Accounts Payable...............................
Purchased supplies on account.
Debit
15
21
Credit
1,720
1,720
b., c., d.
Supplies
15
Date
2003
Nov. 1
12
Item
Balance..................................
................................................
Post.
Ref.
29
Accounts Payable
2003
Nov. 1
12
Balance..................................
................................................
Dr.
Cr.
............ ............
1,720 ............
Balance
Dr.
Cr.
390 ............
2,110 ............
21
29
45
Ex. 215
a.
(1)
(2)
(3)
(4)
Accounts Receivable...........................................
Fees Earned.....................................................
8,210
Supplies.................................................................
Accounts Payable...........................................
1,070
Cash.......................................................................
Accounts Receivable......................................
6,150
Accounts Payable.................................................
Cash..................................................................
750
8,210
1,070
6,150
750
b.
(3)
Cash
6,150 (4)
(2)
Supplies
1,070
(1)
Accounts Receivable
8,210 (3)
(4)
750
6,150
46
Accounts Payable
750 (2)
1,070
Fees Earned
(1)
8,210
Ex. 216
BOGART PARK CO.
Trial Balance
August 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Land......................................................................................
Accounts Payable................................................................
Unearned Rent.....................................................................
Notes Payable......................................................................
Don Cline, Capital................................................................
Don Cline, Drawing..............................................................
Fees Earned.........................................................................
Wages Expense...................................................................
Rent Expense.......................................................................
Utilities Expense..................................................................
Supplies Expense................................................................
Insurance Expense..............................................................
Miscellaneous Expense......................................................
23,450
27,500
4,100
3,150
125,000
13,710
6,000
40,000
110,290
25,000
333,500
175,000
58,000
41,500
5,900
5,000
9,900
503,500
503,500
Ex. 217
Inequality of trial balance totals would be caused by errors described in (a) and
(e).
47
Ex. 218
ENTRE CO.
Trial Balance
December 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Prepaid Insurance................................................................
Equipment............................................................................
Accounts Payable................................................................
Unearned Rent.....................................................................
Byron Reynolds, Capital.....................................................
Byron Reynolds, Drawing...................................................
Service Revenue..................................................................
Wages Expense...................................................................
Advertising Expense...........................................................
Miscellaneous Expense......................................................
21,375
24,600
3,300
68,000
7,950
2,750
91,615
10,000
64,940
33,400
5,200
1,380
167,255
167,255
Ex. 219
Error
1.
2.
3.
4.
5.
6.
7.
(a)
Out of Balance
yes
yes
no
yes
yes
yes
no
(b)
Difference
$1,500
180
1,050
3,600
3,175
48
(c)
Larger Total
credit
credit
debit
debit
debit
Ex. 220
1. The credit column total is added incorrectly. The sum is $147,650, rather
than $94,150.
2. The trial balance should be dated January 31, 2003, not for the month of
January.
3. The Accounts Receivable balance should be in the debit column.
4. The Accounts Payable balance should be in the credit column.
5. The Pug Myslik, Drawing, balance should be in the debit column.
6. The Advertising Expense balance should be in the debit column.
A corrected trial balance would be as follows:
GOULET CO.
Trial Balance
January 31, 2003
Cash......................................................................................
Accounts Receivable..........................................................
Prepaid Insurance................................................................
Equipment............................................................................
Accounts Payable................................................................
Salaries Payable..................................................................
Pug Myslik, Capital..............................................................
Pug Myslik, Drawing............................................................
Service Revenue..................................................................
Salary Expense....................................................................
Advertising Expense...........................................................
Miscellaneous Expense......................................................
8,010
16,400
2,400
52,000
1,850
750
39,600
5,000
78,700
28,400
7,200
1,490
120,900
120,900
Ex. 221
a.
b.
20,000
Accounts Payable.................................................
Cash..................................................................
3,000
49
20,000
3,000
Ex. 222
a.
b.
Supplies.................................................................
Accounts Payable...........................................
750
Cash.......................................................................
Miscellaneous Expense..................................
750
Cash.......................................................................
Accounts Payable...........................................
Accounts Receivable......................................
5,400
750
750
2,700
2,700
Ex. 223
a. 1. Net sales: $6,755,000,000 increase
($18,928,000,000 $12,173,000,000)
55.5% increase ($6,755,000,000 $12,173,000,000)
2. Sales and marketing
expenses:
$1,481,000,000 increase
($3,946,000,000 $2,465,000,000)
60.1% increase ($1,481,000,000 $2,465,000,000)
b. During 2000, the percent increase in sales and marketing expenses (60.1%) is
more than the percent increase in net sales (55.5%), an unfavorable trend.
50
PROBLEMS
Prob. 21A
1. and 2.
(a)
(g)
7,025
Cash
15,000 (b)
3,100 (c)
18,100 (e)
(f)
(h)
(i)
(j)
(m)
(n)
(d)
2,000
2,500
750
1,050
75
2,950
400
1,200
150
11,075
(j)
(i)
Equipment
5,500
Notes Payable
400 (c)
8,600
Accounts Payable
2,950 (d)
(k)
3,075
(l)
Accounts Receivable
4,150
(e)
Supplies
750
Professional Fees
(g)
(l)
(f)
Prepaid Insurance
1,050
(b)
Rent Expense
2,000
(c)
Automobiles
11,500
(m)
Salary Expense
1,200
(n)
Automobile Expense
150
(k)
Blueprint Expense
525
(h)
Miscellaneous Expense
75
9,000
5,500
525
6,025
51
3,100
4,150
7,250
52
7,025
4,150
750
1,050
11,500
5,500
8,600
3,075
15,000
7,250
2,000
1,200
150
525
75
33,925
33,925
Prob. 22A
1.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Cash.......................................................................
Jim Lindley, Capital.........................................
7,500
Rent Expense........................................................
Cash..................................................................
2,500
Supplies.................................................................
Accounts Payable...........................................
1,200
Accounts Payable.................................................
Cash..................................................................
900
Cash.......................................................................
Sales Commissions........................................
15,750
Automobile Expense............................................
Miscellaneous Expense.......................................
Cash..................................................................
2,400
1,250
4,500
Supplies Expense.................................................
Supplies...........................................................
875
2,500
53
7,500
2,500
1,200
900
15,750
3,650
4,500
875
2,500
Prob. 22A
Concluded
2.
(a)
(e)
9,200
(c)
325
Cash
7,500 (b)
15,750 (d)
23,250 (f)
(g)
(i)
Supplies
1,200 (h)
Sales Commissions
(e)
15,750
2,500
900
3,650
4,500
2,500
14,050
(g)
Rent Expense
875
(b)
2,500
Accounts Payable
(d)
900
(c)
300
Automobile Expense
(f)
1,200
2,400
Supplies Expense
(h)
7,500
Miscellaneous Expense
2,500
3.
875
(f)
1,250
HOMESTEAD REALTY
Trial Balance
May 31, 2003
Cash......................................................................................
Supplies................................................................................
Accounts Payable................................................................
Jim Lindley, Capital.............................................................
Jim Lindley, Drawing...........................................................
Sales Commissions.............................................................
Office Salaries Expense......................................................
Rent Expense.......................................................................
Automobile Expense...........................................................
Supplies Expense................................................................
Miscellaneous Expense......................................................
4. a. $15,750
b. $11,525
c. $4,225
54
9,200
325
300
7,500
2,500
15,750
4,500
2,500
2,400
875
1,250
23,550
23,550
Prob. 23A
1.
JOURNAL
Date
20
April 5
6
7
8
10
12
20
23
24
29
29
30
Pages 1 and 2
Description
Post.
Ref.
Cash..........................................................
John Bike, Capital...............................
11
31
18,000
Rent Expense...........................................
Cash.....................................................
53
11
2,000
Equipment................................................
Accounts Payable...............................
16
22
10,500
Truck.........................................................
Cash.....................................................
Notes Payable.....................................
18
11
21
18,000
Supplies...................................................
Cash.....................................................
13
11
1,315
Cash..........................................................
Fees Earned.........................................
11
41
7,300
Prepaid Insurance...................................
Cash.....................................................
14
11
1,200
Accounts Receivable..............................
Fees Earned.........................................
12
41
4,950
Truck Expense.........................................
Accounts Payable...............................
55
22
450
Utilities Expense.....................................
Cash.....................................................
54
11
750
Miscellaneous Expense..........................
Cash.....................................................
59
11
210
Cash..........................................................
Accounts Receivable..........................
11
12
2,200
55
Debit
Credit
18,000
2,000
10,500
10,000
8,000
1,315
7,300
1,200
4,950
450
750
210
2,200
20
April 30
30
30
Pages 1 and 2
Description
Post.
Ref.
Wages Expense.......................................
Cash.....................................................
51
11
3,000
Accounts Payable...................................
Cash.....................................................
22
11
1,800
32
11
3,500
Debit
Credit
3,000
1,800
3,500
2.
GENERAL LEDGER
Cash
Date
20
April 5
6
8
10
12
20
29
29
30
30
30
30
11
Item
Post.
Ref.
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
1
1
1
1
1
1
2
2
2
2
2
2
Accounts Receivable
20
April 23 ................................................
30 ................................................
Dr.
Cr.
.18,000 ............
............
2,000
............ 10,000
............
1,315
7,300 ............
............
1,200
............
750
............
210
2,200 ............
............
3,000
............
1,800
............
3,500
Balance
Dr.
Cr.
18,000
16,000
6,000
4,685
11,985
10,785
10,035
9,825
12,025
9,025
7,225
3,725
............
............
............
............
............
............
............
............
............
............
............
............
12
1
2
56
4,950 ............
............
2,200
4,950 ............
2,750 ............
20
April 10
13
Item
Post.
Ref.
................................................
Prepaid Insurance
20
April 20 ................................................
Cr.
1,315 ............
Balance
Dr.
Cr.
1,315 ............
14
Equipment
20
April 7 ................................................
Truck
20
April 8
Dr.
1,200 ............
1,200 ............
16
10,500 ............
10,500 ............
18
................................................
Notes Payable
20
April 8 ................................................
.18,000 ............
18,000 ............
21
Accounts Payable
20
April 7 ................................................
24 ................................................
30 ................................................
............
8,000 ............
8,000
22
1
1
2
10,500
10,950
9,150
31
............
18,000 ............
18,000
32
57
3,500 ............
3,500 ............
20
April 12
23
41
Item
Post.
Ref.
Dr.
................................................
................................................
1
1
............
............
Wages Expense
20
April 30 ................................................
Cr.
Balance
Dr.
Cr.
7,300 ............
4,950 ............
7,300
12,250
51
Rent Expense
20
April 6 ................................................
3,000 ............
3,000 ............
53
Utilities Expense
20
April 29 ................................................
2,000 ............
2,000 ............
54
Truck Expense
20
April 24 ................................................
750 ............
750 ............
55
Miscellaneous Expense
20
April 29 ................................................
450 ............
450 ............
59
58
210 ............
210 ............
59
3,725
2,750
1,315
1,200
10,500
18,000
8,000
9,150
18,000
3,500
12,250
3,000
2,000
750
450
210
47,400
47,400
Prob. 24A
2. and 3.
JOURNAL
Date
20
Apr. 1
2
5
8
15
17
20
24
27
28
29
30
30
30
Pages 18 and 19
Description
Post.
Ref.
Rent Expense...........................................
Cash.....................................................
52
11
5,000
Office Supplies........................................
Accounts Payable...............................
14
21
1,375
Prepaid Insurance...................................
Cash.....................................................
13
11
1,650
Cash..........................................................
Accounts Receivable..........................
11
12
20,200
Land..........................................................
Cash.....................................................
Notes Payable.....................................
16
11
22
75,000
Accounts Payable...................................
Cash.....................................................
21
11
4,150
Accounts Payable...................................
Office Supplies....................................
21
14
275
Advertising Expense...............................
Cash.....................................................
53
11
1,050
Cash..........................................................
Salary and Commission Expense.....
11
51
350
Automobile Expense...............................
Cash.....................................................
54
11
715
Miscellaneous Expense..........................
Cash.....................................................
59
11
215
Accounts Receivable..............................
Fees Earned.........................................
12
41
28,400
51
11
11,500
32
11
2,000
60
Debit
Credit
5,000
1,375
1,650
20,200
7,500
67,500
4,150
275
1,050
350
715
215
28,400
11,500
2,000
20
Apr. 1
1
5
8
15
17
24
27
28
29
30
30
11
Item
Post.
Ref.
Balance..................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
18
18
18
18
18
18
19
19
19
19
19
Accounts Receivable
20
Apr. 1 Balance..................................
8 ................................................
30 ................................................
Prepaid Insurance
20
Apr. 1 Balance..................................
5 ................................................
Office Supplies
20
Apr. 1 Balance..................................
2 ................................................
20 ................................................
Land
20
Apr. 15
Dr.
Cr.
............ ............
............
5,000
............
1,650
.20,200 ............
............
7,500
............
4,150
............
1,050
350 ............
............
715
............
215
............ 11,500
............
2,000
Balance
Dr.
Cr.
18,150
13,150
11,500
31,700
24,200
20,050
19,000
19,350
18,635
18,420
6,920
4,920
............
............
............
............
............
............
............
............
............
............
............
............
12
18
19
............ ............
............ 20,200
.28,400 ............
48,750 ............
28,550 ............
56,950 ............
13
18
............ ............
1,650 ............
1,100 ............
2,750 ............
14
18
18
............ ............
1,375 ............
............
275
1,050 ............
2,425 ............
2,150 ............
16
................................................
18
61
.75,000 ............
75,000 ............
20
Apr. 1
2
17
20
21
Item
Post.
Ref.
Balance..................................
................................................
................................................
................................................
18
18
18
Notes Payable
20
Apr. 15 ................................................
Fees Earned
20
Apr. 1 Balance..................................
126,500
30 ................................................
154,900
Salary and Commission Expense
20
Apr. 1 Balance..................................
27 ................................................
30 ................................................
Rent Expense
20
Apr. 1 Balance..................................
1 ................................................
Cr.
Balance
Dr.
Cr.
18
Dr.
............
19
............ ............
2,000 ............
1,000 ............
3,000 ............
41
19
............
28,400 ............
51
19
19
18
62
............ ............
5,000 ............
15,000 ............
20,000 ............
20
Apr. 1
24
53
Item
Post.
Ref.
Balance..................................
................................................
18
Automobile Expense
20
Apr. 1 Balance..................................
28 ................................................
Miscellaneous Expense
20
Apr. 1 Balance..................................
29 ................................................
Dr.
Cr.
............ ............
1,050 ............
Balance
Dr.
Cr.
8,900 ............
9,950 ............
54
19
............ ............
715 ............
2,750 ............
3,465 ............
59
19
63
............ ............
215 ............
1,550 ............
1,765 ............
Prob. 24A
Concluded
4.
EASTSIDE REALTY
Trial Balance
April 30, 20
Cash......................................................................................
Accounts Receivable..........................................................
Prepaid Insurance................................................................
Office Supplies....................................................................
Land......................................................................................
Accounts Payable................................................................
Notes Payable......................................................................
Reba Heflin, Capital.............................................................
Reba Heflin, Drawing...........................................................
Fees Earned.........................................................................
Salary and Commission Expense......................................
Rent Expense.......................................................................
Advertising Expense...........................................................
Automobile Expense...........................................................
Miscellaneous Expense......................................................
64
4,920
56,950
2,750
2,150
75,000
8,460
67,500
34,340
3,000
154,900
85,250
20,000
9,950
3,465
1,765
265,200
265,200
Prob. 25A
1. Totals of preliminary trial balance:
Debit
Credit
$47,729.40
$36,293.70
$11,435.70
65
8,316.00
997.90
395.50
16,625.00
6,500.00
1,077.50
17,760.20
1,350.00
8,000.40
3,018.60
436.60
375.00
1,540.00
283.50
33,338.10
33,338.10
Prob. 26A
1.
PERSIAN CARPET
Trial Balance
March 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Equipment............................................................................
Notes Payable......................................................................
Accounts Payable................................................................
Serena Nodvin, Capital.......................................................
Serena Nodvin, Drawing.....................................................
Fees Earned.........................................................................
Wages Expense...................................................................
Rent Expense.......................................................................
Advertising Expense...........................................................
Gas, Electricity, and Water Expense.................................
Miscellaneous Expense......................................................
2,815*
6,125
1,100
550
25,000
15,000
3,910
16,300
8,000
54,790
31,100
7,455
3,200
3,150
1,505
90,000
90,000
66
Prob. 21B
1. and 2.
(a)
(g)
13,955
Cash
25,000 (b)
3,725 (c)
28,725 (d)
(f)
(h)
(i)
(l)
(m)
(n)
(o)
(k)
Accounts Receivable
3,500
(d)
Supplies
300
(f)
Prepaid Insurance
1,200
(b)
Automobiles
18,300
(e)
Equipment
6,200
(n)
Notes Payable
800 (b)
11,500
(h)
6,000
2,500
300
1,200
2,100
120
1,500
105
800
145
14,770
Accounts Payable
2,100 (e)
(j)
4,450
6,200
350
6,550
(c)
Rent Expense
2,500
(l)
Salary Expense
1,500
(j)
Blueprint Expense
350
(o)
Automobile Expense
145
(i)
(m)
12,300
67
Miscellaneous Expense
120
105
225
3,725
3,500
7,225
Prob. 21B
Concluded
3.
JAMES BITNAR, ARCHITECT
Trial Balance
September 30, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Automobiles.........................................................................
Equipment............................................................................
Notes Payable......................................................................
Accounts Payable................................................................
James Bitnar, Capital..........................................................
Professional Fees................................................................
Rent Expense.......................................................................
Salary Expense....................................................................
Blueprint Expense...............................................................
Automobile Expense...........................................................
Miscellaneous Expense......................................................
68
13,955
3,500
300
1,200
18,300
6,200
11,500
4,450
25,000
7,225
2,500
1,500
350
145
225
48,175
48,175
Prob. 22B
1.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Cash.......................................................................
Mary Jo Croy, Capital......................................
10,000
Supplies.................................................................
Accounts Payable...........................................
1,900
Cash.......................................................................
Sales Commissions........................................
22,600
Rent Expense........................................................
Cash..................................................................
4,500
Accounts Payable.................................................
Cash..................................................................
1,000
3,000
Automobile Expense............................................
Miscellaneous Expense.......................................
Cash..................................................................
1,900
1,050
4,000
Supplies Expense.................................................
Supplies...........................................................
905
69
10,000
1,900
22,600
4,500
1,000
3,000
2,950
4,000
905
(b)
995
(e)
Cash
10,000 (d)
22,600 (e)
32,600 (f)
(g)
(h)
Sales Commissions
(c)
22,600
4,500
1,000
3,000
2,950
4,000
15,450
Supplies
1,900 (i)
905
Accounts Payable
1,000 (b)
900
1,900
3.
(d)
Rent Expense
4,500
(h)
(g)
Automobile Expense
1,900
(i)
Supplies Expense
905
(g)
Miscellaneous Expense
1,050
PREFERRED REALTY
Trial Balance
December 31, 2003
Cash......................................................................................
Supplies................................................................................
Accounts Payable................................................................
Mary Jo Croy, Capital..........................................................
Mary Jo Croy, Drawing........................................................
Sales Commissions.............................................................
Rent Expense.......................................................................
Office Salaries Expense......................................................
Automobile Expense...........................................................
Supplies Expense................................................................
Miscellaneous Expense......................................................
4. a. $22,600
b. $12,355
c. $10,245
70
17,150
995
900
10,000
3,000
22,600
4,500
4,000
1,900
905
1,050
33,500
33,500
Prob. 23B
1.
JOURNAL
Date
20
Oct. 10
10
11
13
14
14
15
21
24
26
27
27
Pages 1 and 2
Description
Post.
Ref.
Cash..........................................................
Kirk Hurwitz, Capital...........................
11
31
15,000
Rent Expense...........................................
Cash.....................................................
53
11
1,600
Truck.........................................................
Cash.....................................................
Notes Payable.....................................
18
11
21
15,000
Equipment................................................
Accounts Payable...............................
16
22
3,500
Supplies...................................................
Cash.....................................................
13
11
1,050
Prepaid Insurance...................................
Cash.....................................................
14
11
750
Cash..........................................................
Fees Earned.........................................
11
41
3,100
Accounts Payable...................................
Cash.....................................................
22
11
3,500
Accounts Receivable..............................
Fees Earned.........................................
12
41
5,100
Truck Expense.........................................
Accounts Payable...............................
55
22
280
Utilities Expense.....................................
Cash.....................................................
54
11
1,205
Miscellaneous Expense..........................
Cash.....................................................
59
11
180
71
Debit
Credit
15,000
1,600
5,000
10,000
3,500
1,050
750
3,100
3,500
5,100
280
1,205
180
20
Oct. 29
30
31
Pages 1 and 2
Description
Post.
Ref.
Cash..........................................................
Accounts Receivable..........................
11
12
2,420
Wages Expense.......................................
Cash.....................................................
51
11
2,500
32
11
1,000
Debit
Credit
2,420
2,500
1,000
2.
Cash
Date
20
Oct. 10
10
11
14
14
15
21
27
27
29
30
31
11
Item
Post.
Ref.
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
1
1
1
1
1
1
2
2
2
2
2
2
Accounts Receivable
20
Oct. 24 ................................................
29 ................................................
Dr.
Cr.
.15,000 ............
............
1,600
............
5,000
............
1,050
............
750
3,100 ............
............
3,500
............
1,205
............
180
2,420 ............
............
2,500
............
1,000
Balance
Dr.
Cr.
15,000
13,400
8,400
7,350
6,600
9,700
6,200
4,995
4,815
7,235
4,735
3,735
............
............
............
............
............
............
............
............
............
............
............
............
12
2
2
72
5,100 ............
............
2,420
5,100 ............
2,680 ............
20
Oct. 14
13
Item
Post.
Ref.
................................................
Prepaid Insurance
20
Oct. 14 ................................................
Cr.
1,050 ............
Balance
Dr.
Cr.
1,050 ............
14
Equipment
20
Oct. 13 ................................................
Truck
20
Oct. 11
Dr.
750 ............
750 ............
16
3,500 ............
3,500 ............
18
................................................
Notes Payable
20
Oct. 11 ................................................
.15,000 ............
15,000 ............
21
Accounts Payable
20
Oct. 13 ................................................
21 ................................................
26 ................................................
............
1
2
2
............
3,500 ............
3,500 ............ ............
............
280 ............
3,500
0
280
31
............
15,000 ............
15,000
32
73
1,000 ............
1,000 ............
20
Oct. 15
24
41
Item
Post.
Ref.
Dr.
................................................
................................................
1
2
............
............
Wages Expense
20
Oct. 30 ................................................
Cr.
Balance
Dr.
Cr.
3,100 ............
5,100 ............
3,100
8,200
51
Rent Expense
20
Oct. 10 ................................................
2,500 ............
2,500 ............
53
Utilities Expense
20
Oct. 27 ................................................
1,600 ............
1,600 ............
54
Truck Expense
20
Oct. 26 ................................................
1,205 ............
1,205 ............
55
Miscellaneous Expense
20
Oct. 27 ................................................
280 ............
280 ............
59
74
180 ............
180 ............
Prob. 23B
Concluded
3.
MARQUIS DESIGNS
Trial Balance
October 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Equipment............................................................................
Truck.....................................................................................
Notes Payable......................................................................
Accounts Payable................................................................
Kirk Hurwitz, Capital............................................................
Kirk Hurwitz, Drawing.........................................................
Fees Earned.........................................................................
Wages Expense...................................................................
Rent Expense.......................................................................
Utilities Expense..................................................................
Truck Expense.....................................................................
Miscellaneous Expense......................................................
75
3,735
2,680
1,050
750
3,500
15,000
10,000
280
15,000
1,000
8,200
2,500
1,600
1,205
280
180
33,480
33,480
Prob. 24B
2. and 3.
JOURNAL
Date
20
Dec. 1
2
3
8
10
14
23
29
30
31
31
31
31
31
Pages 18 and 19
Description
Post.
Ref.
Office Supplies........................................
Accounts Payable...............................
14
21
1,100
Rent Expense...........................................
Cash.....................................................
52
11
1,600
Cash..........................................................
Accounts Receivable..........................
11
12
24,200
Prepaid Insurance...................................
Cash.....................................................
13
11
1,925
Accounts Payable...................................
Office Supplies....................................
21
14
150
Advertising Expense...............................
Cash.....................................................
53
11
2,150
Accounts Payable...................................
Cash.....................................................
21
11
1,650
Miscellaneous Expense..........................
Cash.....................................................
59
11
215
Automobile Expense...............................
Cash.....................................................
54
11
850
Cash..........................................................
Salary and Commission Expense.....
11
51
500
51
11
10,850
Accounts Receivable..............................
Fees Earned.........................................
12
41
26,200
Land..........................................................
Cash.....................................................
Notes Payable.....................................
16
11
22
50,000
32
11
2,500
76
Debit
Credit
1,100
1,600
24,200
1,925
150
2,150
1,650
215
850
500
10,850
26,200
10,000
40,000
2,500
20
Dec. 1
2
3
8
14
23
29
30
31
31
31
31
11
Item
Post.
Ref.
Balance..................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
18
18
18
18
18
19
19
19
19
19
19
Accounts Receivable
20
Dec. 1 Balance..................................
3 ................................................
31 ................................................
Prepaid Insurance
20
Dec. 1 Balance..................................
8 ................................................
Office Supplies
20
Dec. 1 Balance..................................
1 ................................................
10 ................................................
Land
20
Dec. 31
Dr.
Cr.
Balance
Dr.
Cr.
18
19
............ ............
............ 24,200
.26,200 ............
28,600 ............
4,400 ............
30,600 ............
13
18
............ ............
1,925 ............
1,750 ............
3,675 ............
14
18
18
............ ............
1,100 ............
............
150
625 ............
1,725 ............
1,575 ............
16
................................................
19
77
.50,000 ............
50,000 ............
20
Dec. 1
1
10
23
21
Item
Post.
Ref.
Balance..................................
................................................
................................................
................................................
18
18
18
Notes Payable
20
Dec. 31 ................................................
Fees Earned
20
Dec. 1 Balance..................................
31 ................................................
Salary and Commission Expense
20
Dec. 1 Balance..................................
31 ................................................
31 ................................................
Rent Expense
20
Dec. 1 Balance..................................
2 ................................................
Cr.
Balance
Dr.
Cr.
3,250
4,350
4,200
2,550
22
19
Dr.
............
40,000 ............
40,000
31
12,625
32
19
19
19
19
............ ............
............
500
.10,850 ............
83,075 ............
82,575 ............
93,425 ............
52
18
78
............ ............
1,600 ............
16,000 ............
17,600 ............
20
Dec. 1
14
53
Item
Post.
Ref.
Balance..................................
................................................
18
Automobile Expense
20
Dec. 1 Balance..................................
30 ................................................
Miscellaneous Expense
20
Dec. 1 Balance..................................
29 ................................................
Dr.
Cr.
............ ............
2,150 ............
Balance
Dr.
Cr.
10,500 ............
12,650 ............
54
19
............
850 ............
3,950 ............
4,800 ............
59
19
79
............ ............
215 ............
600 ............
815 ............
Prob. 24B
Concluded
4.
GALLATIN REALTY
Trial Balance
December 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Prepaid Insurance................................................................
Office Supplies....................................................................
Land......................................................................................
Accounts Payable................................................................
Notes Payable......................................................................
Katie Chaney, Capital..........................................................
Katie Chaney, Drawing........................................................
Fees Earned.........................................................................
Salary and Commission Expense......................................
Rent Expense.......................................................................
Advertising Expense...........................................................
Automobile Expense...........................................................
Miscellaneous Expense......................................................
80
12,460
30,600
3,675
1,575
50,000
2,550
40,000
12,625
12,500
184,925
93,425
17,600
12,650
4,800
815
240,100
240,100
Prob. 25B
1. Totals of preliminary trial balance:
Debit
Credit
$47,729.40
$36,293.70
$11,435.70
81
8,252.60
997.90
395.50
16,625.00
6,500.00
1,077.50
17,760.20
1,350.00
8,000.40
3,018.60
600.00
275.00
1,540.00
283.50
33,338.10
33,338.10
Prob. 26B
1.
PATEL VIDEOGRAPHY
Trial Balance
December 31, 20
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Equipment............................................................................
Notes Payable......................................................................
Accounts Payable................................................................
Ramesh Patel, Capital.........................................................
Ramesh Patel, Drawing.......................................................
Fees Earned.........................................................................
Wages Expense...................................................................
Rent Expense.......................................................................
Advertising Expense...........................................................
Gas, Electricity, and Water Expense.................................
Miscellaneous Expense......................................................
3,765*
8,500
1,250
950
30,000
10,000
3,100
18,000
7,500
98,900
56,730
11,585
5,250
3,150
1,320
130,000
130,000
82
CONTINUING PROBLEM
2. and 3.
JOURNAL
Date
2002
Dec. 1
1
1
2
3
3
4
5
8
11
13
14
Page 1
Description
Post.
Ref.
Cash..........................................................
Lynn Kwan, Capital.............................
11
31
1,500
51
11
800
Prepaid Insurance...................................
Cash.....................................................
15
11
1,680
Cash..........................................................
Accounts Receivable..........................
11
12
600
Cash..........................................................
Unearned Revenue.............................
11
23
2,400
Accounts Payable...................................
Cash.....................................................
21
11
125
Miscellaneous Expense..........................
Cash.....................................................
59
11
75
Office Equipment....................................
Accounts Payable...............................
17
21
2,500
Advertising Expense...............................
Cash.....................................................
55
11
100
Cash..........................................................
Fees Earned.........................................
11
41
300
52
11
250
Wages Expense.......................................
Cash.....................................................
50
11
600
83
Debit
Credit
1,500
800
1,680
600
2,400
125
75
2,500
100
300
250
600
Continuing Problem
Continued
2. and 3.
JOURNAL
Date
2002
Dec. 16
18
21
22
23
27
28
29
30
31
31
31
Page 2
Description
Post.
Ref.
Cash..........................................................
Fees Earned.........................................
11
41
550
Supplies...................................................
Accounts Payable...............................
14
21
375
Music Expense........................................
Cash.....................................................
54
11
120
Advertising Expense...............................
Cash.....................................................
55
11
250
Cash..........................................................
Accounts Receivable..............................
Fees Earned.........................................
11
12
41
200
580
Utilities Expense.....................................
Cash.....................................................
53
11
280
Wages Expense.......................................
Cash.....................................................
50
11
600
Miscellaneous Expense..........................
Cash.....................................................
59
11
85
Cash..........................................................
Accounts Receivable..............................
Fees Earned.........................................
11
12
41
300
300
Cash..........................................................
Fees Earned.........................................
11
41
1,000
Music Expense........................................
Cash.....................................................
54
11
300
32
11
1,000
84
Debit
Credit
550
375
120
250
780
280
600
85
600
1,000
300
1,000
Continuing Problem
Continued
1. and 3.
Cash
Date
2002
Dec. 1
1
1
1
2
3
3
4
8
11
13
14
16
21
22
23
27
28
29
30
31
31
31
11
Item
Post.
Ref.
Dr.
Cr.
Balance..................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
................................................
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
............
1,500
............
............
600
2,400
............
............
............
300
............
............
550
............
............
200
............
............
............
300
1,000
............
............
............
............
800
1,680
............
............
125
75
100
............
250
600
............
120
250
............
280
600
85
............
............
300
1,000
Accounts Receivable
2002
Dec. 1 Balance..................................
2 ................................................
23 ................................................
30 ................................................
Balance
Dr.
Cr.
3,080
4,580
3,780
2,100
2,700
5,100
4,975
4,900
4,800
5,100
4,850
4,250
4,800
4,680
4,430
4,630
4,350
3,750
3,665
3,965
4,965
4,665
3,665
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
12
1
2
2
Supplies
2002
Dec. 1 Balance..................................
18 ................................................
............ ............
............
600
580 ............
300 ............
600 ............
580 ............
880 ............
14
Prepaid Insurance
2002
Dec. 1 ................................................
............ ............
375 ............
85 ............
460 ............
15
85
1,680 ............
1,680 ............
Continuing Problem
Continued
Office Equipment
Date
2002
Dec. 5
17
Item
Post.
Ref.
................................................
Dr.
Cr.
2,500 ............
Balance
Dr.
Cr.
2,500 ............
18
Accounts Payable
2002
Dec. 1 Balance..................................
3 ................................................
5 ................................................
18 ................................................
21
1
1
2
............
2,500 ............
............
375 ............
125
2,500
2,875
Wages Payable
This account is not used in Chapter 2.
22
Unearned Revenue
2002
Dec. 3 ................................................
23
1
............
2,400 ............
2,400
31
3,500
5,000
32
............ ............
1,000 ............
125 ............
1,125 ............
Income Summary
This account is not used in Chapter 2.
33
Fees Earned
2002
Dec. 1 Balance..................................
11 ................................................
16 ................................................
23 ................................................
30 ................................................
31 ................................................
41
1
2
2
2
2
86
2,375
2,675
3,225
4,005
4,605
5,605
Continuing Problem
Continued
Wages Expense
Date
2002
Dec. 1
14
28
50
Item
Post.
Ref.
Balance..................................
................................................
................................................
1
2
Dr.
Cr.
............ ............
600 ............
600 ............
Balance
Dr.
Cr.
200 ............
800 ............
1,400 ............
51
............ ............
800 ............
500 ............
1,300 ............
52
Utilities Expense
2002
Dec. 1 Balance..................................
27 ................................................
............ ............
250 ............
325 ............
575 ............
53
Music Expense
2002
Dec. 1 Balance..................................
21 ................................................
31 ................................................
............ ............
280 ............
150 ............
430 ............
54
2
2
Advertising Expense
2002
Dec. 1 Balance..................................
8 ................................................
22 ................................................
............ ............
120 ............
300 ............
470 ............
590 ............
890 ............
55
1
2
Supplies Expense
2002
Dec. 1 Balance..................................
............ ............
100 ............
250 ............
300 ............
400 ............
650 ............
56
Insurance Expense
This account is not used in Chapter 2.
............ ............
90 ............
57
87
Continuing Problem
Concluded
Depreciation Expense
Date
58
Post.
Ref.
Item
Dr.
Cr.
Balance
Dr.
Cr.
59
1
2
............ ............
75 ............
85 ............
75 ............
150 ............
235 ............
4.
DANCIN MUSIC
Trial Balance
December 31, 2002
Cash......................................................................................
Accounts Receivable..........................................................
Supplies................................................................................
Prepaid Insurance................................................................
Office Equipment.................................................................
Accounts Payable................................................................
Unearned Revenue..............................................................
Lynn Kwan, Capital..............................................................
Lynn Kwan, Drawing...........................................................
Fees Earned.........................................................................
Wages Expense...................................................................
Office Rent Expense...........................................................
Equipment Rent Expense...................................................
Utilities Expense..................................................................
Music Expense.....................................................................
Advertising Expense...........................................................
Supplies Expense................................................................
Miscellaneous Expense......................................................
88
3,665
880
460
1,680
2,500
2,875
2,400
5,000
1,125
5,605
1,400
1,300
575
430
890
650
90
235
15,880
15,880
SPECIAL ACTIVITIES
Activity 21
Acceptable ethical conduct requires that Dana look for the difference. If Dana
cannot find the difference within a reasonable amount of time, she should confer
with her supervisor as to what action should be taken so that the financial
statements can be prepared by the 5 o'clock deadline. Dana's responsibility to
her employer is to act with integrity, objectivity, and due care, so that users of the
financial statements will not be misled.
Activity 22
The following general journal entry should be used to record the receipt of tuition
payments received in advance of classes:
Cash.......................................................................
Unearned Tuition Deposits............................
XXXX
XXXX
Activity 23
The journal is called the book of original entry. It provides a time-ordered history
of the transactions that have occurred for the firm. This time-ordered history is
very important because it allows one to trace ledger account balances back to
the original transactions that created those balances. This is called an audit
trail. If the firm recorded transactions by posting ledgers directly, it would be
nearly impossible to reconstruct actual transactions. The debits and credits
would all be separated and accumulated into the ledger balances. Once the
transactions became part of the ledger balances, the original transactions would
be lost. In other words, there would be no audit trail, and any errors that might
occur in recording transactions would be almost impossible to trace. Thus, firms
first record transaction debits and credits in a journal. These transactions are
then posted to the ledger to update the account balances. The journal and ledger
are linked using posting references. This allows an analyst to trace the
transaction flow forward or backward, depending upon the need.
89
Activity 24
1. The rules of debit and credit must be memorized. Sean is correct in that the
rules of debit and credit could be reversed as long as everyone accepted and
abided by the rules. However, the important point is that everyone accepts
the rules as the way in which transactions should be recorded. This
generates uniformity across the accounting profession and reduces errors
and confusion. Since the current rules of debit and credit have been used for
centuries, Sean should adapt to the current rules of debit and credit, rather
than devise his own.
The primary reason that all accounts do not have the same rules for
increases and decreases is for control of the recording process. The doubleentry accounting system, which includes both (1) the rules of debit and credit
and (2) the accounting equation, guarantees that (1) debits always equals
credits and (2) assets always equals liabilities plus owners equity. If all
increases in the account were recorded by debits, then the control that debits
always equals credits would be removed. In addition, the control that the
normal balance of assets is a debit would also be removed. The accounting
equation would still hold, but the control over recording transactions would
be weakened.
Sean is correct that we could call the left and right sides of an account
different terms, such as LE or RE. Again, centuries of tradition dictate the
current terminology used. One might note, however, that in Latin, debere
(debit) means left and credere (credit) means right.
2. The accounting system may be designed to capture information about the
buying habits of various customers or vendors, such as the quantity normally
ordered, average amount ordered, number of returns, etc. Thus, in a sense,
there can be other sides of (information about) a transaction that are
recorded by the accounting system. Such information would be viewed as
supplemental to the basic double-entry accounting system.
90
Activity 25
a. Although the titles and numbers of accounts may differ, depending on how
expenses are classified, the following accounts would be adequate for
recording transaction data for Fairway Caddy Service:
Balance Sheet Accounts
1. Assets
11
12
13
4. Revenue
Cash
Accounts Receivable
Supplies
41
5. Expenses
51
52
53
54
55
2. Liabilities
21
Accounts Payable
3. Owner's Equity
31
32
Service Revenue
Rent Expense
Supplies Expense
Salary Expense
Utilities Expense
Miscellaneous Expense
b.
FAIRWAY CADDY SERVICE
Income Statement
For Month Ended June 30, 20
Service revenue...................................................................
Operating expenses:
Rent expense................................................................
Supplies expense.........................................................
Salary expense.............................................................
Utilities expense...........................................................
Miscellaneous expense...............................................
Total operating expenses.....................................
Net income...........................................................................
$2,975
$1,200
402
260
105
125
2,092
$ 883
91
Activity 25Continued
20
June 1
15
30
30
2,250
Cash
20
1,500 June
1,120
1,475
175
4,270
11
1
2
3
17
20
28
30
30
Accounts Receivable
20
20
June 25
380 June 30
205
20
June 2
7
22
98
Supplies
20
150 June 30
180
170
500
Accounts Payable
20
20
June 17
180 June 3
20
250
7
430
22
170
Shelley Dolvin, Capital
20
June 1
Service Revenue
20
June 15
25
30
200
150
750
180
250
125
105
260
2,020
Rent Expense
20
June 1
3
12
175
13
402
52
53
260
Utilities Expense
20
June 30
51
402
Salary Expense
20
June 30
1,120
380
1,475
2,975
200
1,000
1,200
Supplies Expense
20
June 30
41
54
105
21
Miscellaneous Expense
250
180
170
600
20
June 28
31
1,500
92
125
55
Activity 25Concluded
c. $2,250, computed in the following manner:
Cash receipts:
Initial investment....................................................
Cash sales..............................................................
Collections on accounts.......................................
Total cash receipts during June..................
$1,500
2,595
175
Cash disbursements:
Rent expense..........................................................
Supplies purchased for cash................................
Salary expense.......................................................
Payment for supplies on account........................
Utilities expense....................................................
Miscellaneous expense.........................................
Total cash disbursements during June.......
$1,200
150
260
180
105
125
$4,270
2,020
$2,250*
*If the student used T accounts in completing part (b), or this part, this
amount ($2,250) should agree with the balance of the cash account.
d. The difference of $130 between the cash on hand according to records
($2,250) and the cash on hand according to the count ($2,120) could be due
to many factors, including errors in the record keeping and withdrawals made
by Shelley.
Activity 26
Note to Instructors: The purpose of this activity is to familiarize students with the
job opportunities available in accounting or in fields that require (or prefer) the
employee to have some knowledge of accounting.
93