Chapter 2 – the Recording Process

Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item.

1. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of uncollectible accounts expense reported on the income statement?

The transactions completed by Franklin Company during January, its first month of operations, are listed below. Assume that Franklin Company uses the following journals: Cash Receipts (CR), Cash Payments (CP), Revenue (R), Purchases (P), and General (G). Assume that it uses Accounts Receivable and Accounts Payable Subsidiary Ledgers as well as a General Ledger. Indicate by letters which journal would be used for each transaction. Also indicate if the entry requires a posting to a subsidiary ledger.

a. Accounts Payable and Accrued Expenses please provide a detail [sic] explanation why there is a $50,951.18 debit balance in this account?

Part C (4 Marks) In the Balance Sheet as at 30 June 2014, what would be the closing balance of retained profits? Show all workings.

For the cash account to decrease and the profit to decrease, the transaction occurring could have been a/an:

(TCO D) Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner?

(ii) An account for each unit setting forth any shares of common expenses or other charges due, the due dates thereof, the present balance due, and any interest in common surplus.”

a. Arrange the following asset, liability, and owner’s equity elements of the accounting equation: Cash, Accounts Receivable, Office Furniture, Van, Accounts Payable, Common Stock/Dividends, and Revenues/Expenses. (See Exhibit 1.5)

The beginning step in the accounting cycle is analyzing and recording transactions. This is when the “information gets organized in either an asset, liability, common stock, retained earnings, dividends, revenue, or expense

(5-10 min.) 1. Total purchases on account…………….. $2,876 2. Total Accounts Payable paid off during November………………………….. $ 819 3. In Motion owes House Textiles…………. $ 451 In total, In Motion owes $2,057 on account.

What correcting entry should you prepare? 54 A. Office Expense Accounts Payable 54 54 B. Accounts Payable Office Expense 54 28 C. Accounts Payable Office Expense 28 D. No entry is needed

6. Montana Inc.'s fiscal year ended on December 31, 2012. The balance in the prepaid insurance account as of December 31, 2012, was $34,800 (before adjustment) and consisted of the following policies:

(TCO 1) Which pair of accounts follows the rules of debit and credit, in relation to increases and decreases, in the same manner?

Items of value to a company such as equipment or supplies needed for running an efficient business are called an asset. A liability is when a company owes for a service or pay for employees. After a liability is subtracted from an asset this becomes the owners interest in the company or owners’ equity. Regardless of the standards followed by accountants, they will always classify accounts into these three categories resulting in the Accounting Equation: (Editorial Board, 2012, p. 9- 10)