1.
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting rules for Journal entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.
To Record: Each transaction of Company GA for the month of July.
1.
Explanation of Solution
Journalize the transactions of Company GA for the month of July.
Date | Account Title and Explanation | Debit($) | Credit($) |
July 1, 2018 | Cash | 10,000 | |
Common Stock | 10,000 | ||
(To record the issue of common stock to Person S) | |||
July 1, 2018 | Cash | 10,000 | |
Common Stock | 10,000 | ||
(To record the issue of common stock to Person T) | |||
July 1, 2018 | Prepaid Insurance | 4,800 | |
Cash | 4,800 | ||
(To record the purchase of insurance policy) | |||
July 2, 2018 | Legal Fees Expense | 1,500 | |
Cash | 1,500 | ||
(To record the payment of legal fees for incorporation) | |||
July 4, 2018 | Office Supplies | 1,800 | |
Accounts Payable | 1,800 | ||
(To record the purchase of supplies on account) | |||
July 7, 2018 | Advertising Expense | 300 | |
Cash | 300 | ||
(To record the payment for advertising ) | |||
July 8, 2018 | Equipment–Bikes | 12,000 | |
Cash | 12,000 | ||
(To record the purchase of mountain bikes) | |||
July 15, 2018 | Cash | 2,000 | |
Service Revenue | 2,000 | ||
(To record the collection of cash for services mountain bikes clinic) | |||
July 22, 2018 | Cash | 2,300 | |
Service Revenue | 2,300 | ||
(To record the collection of cash for services mountain bikes clinic) | |||
July 22, 2018 | Advertising Expense | 700 | |
Cash | 700 | ||
(To record the payment of salary expenses) | |||
July 30, 2018 | Cash | 4,000 | |
Deferred Revenue | 4,000 | ||
(To record the receipt of cash in advance for K clinic) |
Table (1)
2. and 3.
T-account:
An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:
- The title of the account
- The left or debit side
- The right or credit side
To Calculate: The balance of each account by posting each transaction to the appropriate T-accounts.
2. and 3.
Explanation of Solution
Cash Account
Cash Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | July 1, 2018 |
Prepaid insurance (Transaction 3) | 4,800 | |
July 1, 2018 |
Common stock (Transaction 1) | 10,000 | July 2, 2018 |
Legal fees expense (Transaction 4) | 1,500 | |
July 1, 2018 |
Common stock (Transaction 2) | 10,000 | July 7, 2018 |
Advertising expense (Transaction 6) | 300 | |
July 15, 2018 |
Service revenue (Transaction 8) | 2,000 | July 8, 2018 |
Equipment Transaction 7) | 12,000 | |
July 22, 2018 |
Service revenue (Transaction 9) | 2,300 | July 24, 2018 |
Advertising expense (Transaction 10) | 700 | |
July 30, 2018 |
Unearned revenue (Transaction 11) | 4,000 | ||||
Total | 28,300 | Total | 19,300 | |||
July 31, 2018 | Ending Balance | 9,000 |
Table (2)
Prepaid Insurance Account
Prepaid Insurance Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | - | |||
July 1, 2018 |
Cash (Transaction 3) | 4,800 | - | |||
Total | 4,800 | Total | - | |||
July 31, 2018 | Ending Balance | 4,800 |
Table (3)
Office Supplies Account
Office Supplies Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | - | |||
July 4, 2018 |
Accounts Payable (Transaction 5) | 1,800 | - | |||
Total | 1,800 | Total | - | |||
July 31, 2018 | Ending Balance | 1,800 |
Table (4)
Equipment Account
Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | - | |||
July 8, 2018 |
Cash (Transaction 7) | 12,000 | - | |||
Total | 12,000 | Total | - | |||
July 31, 2018 | Ending Balance | 12,000 |
Table (5)
Accounts Payable
Accounts Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | ||||
July 4, 2018 | Office Supplies (Transaction 5) | 1,800 | ||||
Total | 1,800 | |||||
July 31, 2018 | Ending Balance | 1,800 |
Table (6)
Deferred Revenue
Deferred Revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
- | July 1, 2018 | Beginning balance | 0 | |||
July 30, 2018 |
Cash (Transaction 11) | 4,000 | ||||
Total | - | Total | 4,000 | |||
July 31, 2018 | Ending Balance | 4,000 |
Table (7)
Common Stock
Common Stock Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | ||||
July 1, 2018 | Cash (Transaction 1) | 10,000 | ||||
July 1, 2018 | Cash (Transaction 1) | 10,000 | ||||
Total | 20,000 | |||||
July 31, 2018 | Ending Balance | 20,000 |
Table (8)
Service Revenue
Service Revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | ||||
July 15, 2018 |
Cash (Transaction 8) | 2,000 | ||||
July 22, 2018 |
Cash (Transaction 9) | 2,300 | ||||
Total | 4,300 | |||||
July 31, 2018 | Ending Balance | 4,300 |
Table (9)
Advertising Expense
Advertising Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | ||||
July 7, 2018 |
Cash (Transaction 6) | 300 | ||||
July 24, 2018 |
Cash (Transaction 10) | 700 | ||||
Total | 1,000 | |||||
July 31, 2018 | Ending Balance | 1,000 |
Table (10)
Legal Fees Expense
Legal Fee Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
July 1, 2018 | Beginning balance | 0 | ||||
July 2, 2018 |
Cash (Transaction 4) | 1,500 | ||||
Total | 1,500 | |||||
July 31, 2018 | Ending Balance | 1,500 |
Table (11)
4.
A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.
To Prepare: A trial balance as of July.
4.
Explanation of Solution
Prepare the trial balance of Company GA.
Company GA Trial Balance July 31, 2018 | ||
Particulars | Debit ($) | Credit ($) |
Cash | 9,000 | |
Prepaid Insurance | 4,800 | |
Office Supplies | 1,800 | |
Equipment | 12,000 | |
Accounts Payable | 1,800 | |
Unearned Revenue | 4,000 | |
Common Stock | 20,000 | |
Service Revenue | 4,300 | |
Advertising Expense | 1,000 | |
Legal Fees Expense | 1,500 | |
Total | 30,100 | 30,100 |
Table (12)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $30,100.
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Chapter 2 Solutions
Financial Accounting - Access
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- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning