Concept explainers
External events:
External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.
There are six steps involved to measure the external transaction. They are as follows:
Step1: Identify the accounts that are affected by an external transaction using the source documents.
Step 2: Impact of the transactions on the
Step 3: Transaction which results in a debit or credit to account balances should be assessed.
Step 4: The assessed transactions which are resulted in debit or credit is then recorded in journal.
Step 5: The transactions which are recorded in journal are posted to the general ledger.
Step 6: At last, the
To Write: A memo to the instructor describing each step of the six-step measurement process for each of the three transactions.
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FINANCIAL ACCOUNTING W/ACCESS >CI<
- Journal Entries and a Balance Sheet Krittersbegone Inc. was organized on July 1 by a group of technicians to provide termite inspections and treatment to homeowners and small businesses. The following transactions occurred during the first month of business: July 2: Received contributions of $3,000 from each of the six owners in exchange for shares of stock. July 3: Paid $1,000 rent for the month of July. July 5: Purchased flashlights, tools, spray equipment, and ladders for $18,000, with a down payment of $5,000 and the balance due in 30 days. July 17: Paid a $200 bill for the distribution of door-to-door advertising. July 28: Paid August rent and July utilities to the landlord in the amounts of $1,000 and $450, respectively. July 30: Received $8,000 in cash from homeowners for services performed during the month. In addition, billed $7,500 to other customers for services performed during the month. Billings are due in 30 days. July 30: Paid commissions of $9,500 to the technicians for July. Required Prepare journal entries on the books of Krittersbegone to record the transactions entered into during the month. Ignore depreciation expense. Prepare a classified balance sheet dated July 31. From the balance sheet, what cash inflow and what cash outflow can you predict in the month of August? Who would be interested in the cash flow information? Why?arrow_forwardEntries into T accounts and trial balance Marjorie Knaus, an architect, organized Knaus Architects on January 1, 20Y4. During the month, Knaus Architects completed the following transactions: a. Issued common stock to Marjorie Knaus in exchange for 30,000. b. Paid January rent for office and workroom, 2,500. c. Purchased used automobile for 28,500, paying 6,000 cash and giving a note payable for the remainder. d. Purchased office and computer equipment on account, 8,000. e. Paid cash for supplies, 2,100. f. Paid cash for annual insurance policies, 3,600. g. Received cash from client for plans delivered, 9,000. h. Paid cash for miscellaneous expenses, 2,600. i. Paid cash to creditors on account, 4,000. j. Paid installment due on note payable, 1,875. k. Received invoice for blueprint service, due in February, 5,500. l. Recorded fees earned on plans delivered, payment to be received in February, 31,400. m. Paid salary of assistants, 6,000. n. Paid gas, oil, and repairs on automobile for January, 1,300. Instructions 1. Record these transactions directly in the following T accounts, without journalizing: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Automobiles, Equipment, Notes Payable, Accounts Payable, Common Stock, Professional Fees, Salary Expense, Blueprint Expense, Rent Expense, Automobile Expense, Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance. 3. Prepare an unadjusted trial balance for Knaus Architects as of January 31, 20Y4. 4. Determine the net income or net loss for January.arrow_forwardJournal entries and trial balance On October 1, 20Y4, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business in exchange for common stock, 18,000. 4. Paid rent for period of October 4 to end of month, 3,000. 10. Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13. Purchased equipment on account, 10,500. 14. Purchased supplies for cash, 2,100. Oct. 15. Paid annual premiums on property and casualty insurance, 3,600. 15. Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21. Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24. Recorded jobs completed on account and sent invoices to customers, 14,150. 26. Received an invoice for truck expenses, to be paid in November, 700. 27. Paid utilities expense, 2,240. 27. Paid miscellaneous expenses, 1,100. 29. Received cash from customers on account, 7,600. 30. Paid wages of employees, 4,800. 31. Paid dividends, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 16 Equipment 18 Truck 21 Notes Payable 22 Accounts Payable 31 Common Stock 33 Dividends 41 Fees Earned 51 Wages Expense 53 Rent Expense 54 Utilities Expense 55 Truck Expense 59 Miscellaneous Expense 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 20Y4. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forward
- Journal Entries, Trial Balance, and Financial Statements Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business: June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. June 8: Signed a two-year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. June 17: Paid a $900 bill from the local newspaper for advertising for the month of June. June 23: Received the amounts billed to clients for services performed during the first half of the month. June 28: Received and paid gas, electric, and water bills. The total amount is $2,700. June 29: Received the landlords bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month. June 30: Paid salaries and wages for June. The total amount is $5,670. June 30: Billed $18,400 to clients for the second half of June. June 30: Declared and paid dividends in the amount of $6,000. Required Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense. Prepare a trial balance at June 30. Prepare the following financial statements: Income statement for the month of June Statement of retained earnings for the month of June Classified balance sheet at June 30 Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.arrow_forwardJournalize for Harper and Co. each of the following transactions or state no entry required and explain why. Be sure to follow proper journal writing rules. A. A corporation is started with an investment of $50,000 in exchange for stock. B. Equipment worth $4,800 is ordered. C. Office supplies worth $750 are purchased on account. D. A part-time worker is hired. The employee will work 15–20 hours per week starting next Monday at a rate of $18 per hour. E. The equipment is received along with the invoice. Payment is due in three equal monthly installments, with the first payment due in sixty days.arrow_forwardWinnie Villanueva is a painting contractor. During the month of April, she completed the following transactions: April 2 Invested in the business painting equipment valued at P12, 300 and placed P71,000 in a business checking account. 3 Acquired a service vehicle costing P80, 000. Paid P50, 000 cash and signed a note for the balance. 4 Purchase painting supplies on account for P3, 200. 5 Completed a painting job and billed the customer P4, 800. 7 Received P1, 500 cash for painting an apartment room. 10 Purchased painting supplies for P1, 600 CASH. 11 Received a P4, 800 check from customer billed on April 5. 12 Paid P4, 000 for an insurance policy for a one-year coverage. 13 Billed a customer P6, 200 for painting job. 14 Paid the assistant P1, 500 for twenty-five hours’ work. 15 Paid P400 for a tune-up of the service vehicle. 18 Paid for the painting supplies purchased on April 4.…arrow_forward
- The following transactions were completed by the company: The company completed consulting work for a client and immediately collected $7,100 cash. The company completed commission work for a client and sent a bill for $5,600 to be received within 30 days. The company paid an assistant $2,200 cash as wages for the period. The company collected $2,800 cash as a partial payment for the amount owed by the client in transaction b. The company paid $1,020 cash for this period's cleaning services.arrow_forwardKenneth Ang is a painting contractor. During the month of April, he completed the following transactions:Apr. 2 Invested in the business painting equipment valued at P12,300 and placed P71,000 in a business checking account.3 Acquired a service vehicle costing P80,000. Paid P50,000 cash and signed a note for the balance.4 Purchased painting supplies on account for P3,200.5 Completed a painting job and billed the customer P4,800.7 Received P1,500 cash for painting an apartment room.10 Purchased painting supplies for P1,600 cash.11 Received a P4,800 check from the customer billed on April 5.12 Paid P4,000 for an insurance policy for a one-year coverage.13 Billed a customer P6,200 for a painting job.14 Paid the assistant P1,500 for twenty-five hours’ work.15 Paid P400 for a tune-up of the service vehicle.18 Paid for the painting supplies purchased on April 4.20 Purchased a new ladder for P6,000 and painting supplies for P2,900, on account.22 Received a telephone bill for P600, due next…arrow_forwardOn April 1, Margaret Moore established Moore’s Travel Agency. The following transactions were completed during the month.1. 2. 3. 4. 5.6.7. 8. 9.10 .Invested $14,000 cash to start the agency.Paid $700 cash for April office rent.Purchased equipment for $3,600 cash.Incurred $900 of advertising costs in the Chicago Tribune, on account. Paid $900 cash for office supplies.Performed services worth $10,000: $2,500 cash is received from customers, and the balance of $7,500 is billed to customers on account.Withdrew $500 cash for personal use.Paid Chicago Tribune $700 of the amount due in transaction (4). Paid employees' salaries $2,200.Received $4,500 in cash from customers who have previously been billed in transaction (6).arrow_forward
- Carma Garcia opened Shifting Sands Cleaning Service on August 1. During August, the company completed the following transactions:Aug1 Carma Garcia invested $45,530 cash and $8,765 of cleaning equipment in the business.1 Purchased a used truck for $10,500, paying $4,000 cash and the balance on account.3 Purchased cleaning supplies for $1,985 on account.5 Paid $1,800 on a one-year insurance policy, effective August 1.8 Received $1,650 from customer for future cleaning services.12 Billed customers $5,830 for cleaning services.18 Paid $2,000 of amount owed on truck.20 Paid $1,672 for employee salaries.21 Collected $3,795 from customers billed on August 12.25 Billed customers $4,369 for cleaning services.31 Paid gasoline for the month on the truck, $325.31 Owner withdrew $1,000 for personal use.Adjustments:Aug31 Earned but unbilled fees at August 31 were $2,145.Depreciation on truck for the month was $175. Earned $450 of payment received on August 8.One-twelfth of the insurance expired.An…arrow_forwardTransactions; Financial reports that summarize the effects of events on a business.Financial Statements On April 1, 20Y8, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April: Opened a An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.business bank account with a deposit of $31,000 in exchange for common stock. Purchased supplies on account, $3,110. Paid creditor on account, $1,970. Earned The total amount charged customers for merchandise sold, including cash sales and sales on account.sales commissions, receiving cash, $31,770. Paid rent on office and equipment for the month, $6,230. Paid dividends, $10,000. Paid automobile Assets used up or services consumed in the process of generating revenues.expenses for month, $2,990, and miscellaneous expenses, $1,430. Paid office salaries, $3,750. Determined that the cost of…arrow_forwardTask: create a journal entry and T accounts with the following transaction MAB cleaning services is owned and established by Marc Anthony Barez. As initial capital. Barez gave 590,000 worth of cash and 900,100 worth of equipments. As initial transaction for the month of january1. purchased office furniture 84,750 on account under CBA furniture2. bought supplies worth 12,220 in cash3. render a service to a client on account 8,5204. pays employee's salary 16,5005. render services to a client 23,0006. received payment for the services rendered on jan 37. pays utilities for the month 2,3008. washed clothes for mr. alvin 13,5009. pays rent expense 2,50010. mr. barez withdrawals 21,50011. renders service for ms. fontanilla on account 17,50012. bought new equipment worth 78,250 on accountsarrow_forward
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