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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Account for revenue

Bozeman College requires students to pay tuition each term before classes begin. Students who have not paid their tuition are not allowed to enroll or to attend classes.

What journal entry do you trunk Bozeman College would use to record the receipt of the students' tuition payments? Describe the nature of each account in the entry.

To determine

Journal:

Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of Debit and Credit

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expense, dividends, and owner’s drawing accounts, and all decrease in liabilities, revenues and owner’s capital accounts.
  • Credit, all increase in liabilities, revenues, and owner’s capital accounts, and all decrease in assets, expenses, and owner’s drawing account.

To identify: The journal entry which College B would use to record the receipt of the student’s tuition payments.

Explanation

The journal entry which College B should use to record the receipt of the student’s tuition payments received in advance of the classes is as follows:

Date Description PostRef. Debit ($) Credit ($)
    Cash   XXX  
        Unearned tuition deposits     XXX
    (To record the receipt of the student’s tuition payments received in advance)      

Table (1)

In recording the receipt of the student’s tuition payments received in advance, the following effects have taken place:

  • Cash is an asset account, and it is increased. Hence, debit it.
  • Unearned tuition deposits are the liability account, and they are increased. Hence, credit them.

The journal entry to record the earned portion of the tuition deposits are as follows:

Date Description PostRef...

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