Concept explainers
1
Journal:
Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
To record: The transactions for Incorporation BE.
1
Answer to Problem 2.8BP
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
November 1 | Cash | 13,000 | ||
Common stock | 13,000 | |||
(To record the entry for issue of common stock for cash) | ||||
November 2 | Equipment | 3,500 | ||
Notes payable | 3,500 | |||
(To record the entry for purchase of land with note payable) | ||||
November 4 | Supplies | 1,000 | ||
Accounts payable | 1,000 | |||
(To record the entry for purchase of supplies on account) | ||||
November 10 |
| 9,000 | ||
Service Revenue | 9,000 | |||
(To record the entry for providing service on account ) | ||||
November 15 | Accounts payable | 1,100 | ||
Cash | 1,100 | |||
(To record the entry for payment made to creditors) | ||||
November 20 | Salaries expense | 3,000 | ||
Cash | 3,000 | |||
(To record the entry for payment of salaries expenses) | ||||
November 22 | Cash | 11,000 | ||
Service revenue | 11,000 | |||
(To record the entry for providing service on account) | ||||
November 24 | Notes payable | 1,400 | ||
Cash | 1,400 | |||
(To record the entry for payment of notes payable) | ||||
November 26 | Cash | 7,000 | ||
Accounts receivable | 7,000 | |||
(To record the entry for receiving cash on account) | ||||
November 28 | utilities expense | 1,100 | ||
Cash | 1,100 | |||
(To record the entry for payment of utility expense) | ||||
November 30 | Rent expense | 5,000 | ||
Cash | 5,000 | |||
(To record the payment of rent expense) |
Table (1)
Explanation of Solution
November 1
Description:
- Cash is an asset. There is an increase in the asset. So debit the cash account with $13,000.
- Common stock is a component of
stockholders’ equity. There is an increase in the common stock which increases the stockholders’ equity. So credit the common stock with $13,000.
November 2
Description:
- Equipment is an asset. There is an increase in the asset. So debit the equipment account with.$3,500
- Notes payable is a liability. There is an increase in the liability. So credit the cash account with $3,500.
November 4
Description:
- Supplies are an asset. There is an increase in the asset. So debit supplies account with $1,000.
- Accounts payable is a liability. There is an increase in the liability. So credit accounts payable account with $1,000.
November 10
Description:
- Accounts receivable is an asset. There is an increase in the asset. So debit accounts receivable with $9,000.
- Service revenue is a revenue account and it is the component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue with $9,000.
November 15
Description:
- Accounts payable is a liability. There is an increase in the liability. So debit accounts payable with $1,100.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,100.
November 20
Description:
- Salaries expenses are an expense account and it is a component of the stockholders’ equity. There is an increase in expenses which reduces the stockholders’ equity. So debit salaries expense account with $3,000.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $3,000.
November 22
Description:
- Cash is an asset. There is an increase in the asset. So debit cash account with $11,000.
- Service revenue is a revenue account and it is a component of stockholders’ equity. There is an increase in the revenue account which increases the stockholders’ equity. So credit service revenue account with $11,000.
November 24
Description:
- Notes payable is a liability. There is a decrease in the liability. So debit notes payable with $1,400.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,400.
November 26
Description:
- Cash is an asset account. There is an increase in the asset. So debit cash account with $7,000.
- Accounts receivable is an asset. There is a decrease in the asset. So credit accounts receivable with $7,000.
November 28
Description:
- Utilities expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit utilities expense with $1,100.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $1,100.
November 30
Description:
- Rent expense is an expense account and it is a component of stockholders’ equity. There is an increase in the expense and it will decrease the stockholders’ equity. So debit rent expense with $5,000.
- Cash is an asset. There is a decrease in the asset. So credit cash account with $5,000.
2, 3
T-account:
T-account is the form of the ledger account, where the
The components of the T-account are as follows:
a) The title of the account
b) The left or debit side
c) The right or credit side
To calculate: The ending balance of each account by
2, 3
Explanation of Solution
Prepare T-account:
Accounts receivable account:
Accounts receivable | |||
Opening balance | 6,000 | ||
Service revenue | 9,000 | Cash | 7,000 |
Total | 15,000 | Total | 15,000 |
Balance November 30 | 2,600 |
Service revenue account:
Service revenue | |||
Accounts receivable | 9,000 | ||
cash | 11,000 | ||
Balance November 30 | 20,000 | ||
Equipment account:
Equipment | |||
Opening balance | 9,400 | ||
Notes payable | 3,500 | ||
Balance November 30 | 12,900 |
Cash account:
Cash | |||
Opening balance | 3,200 | Accounts payable | 1,100 |
Common stock | 13,000 | salaries expense | 3,000 |
Service revenue | 11,000 | Notes payable | 1,400 |
utilities expense | 1,100 | ||
Rent expense | 5,000 | ||
Total | 34,200 | Total | 34,200 |
Balance November 30 | 22,600 |
Supplies account:
supplies | |||
Opening balance | 700 | ||
Accounts payable | 1,000 | ||
Balance November 30 | 1,700 |
Accounts payable:
Accounts payable | |||
Opening balance | 2,000 | ||
Cash | 1,100 | Supplies | 1,000 |
Balance November 30 | 1,900 |
Salaries expense account:
Salaries expense | |||
Opening balance | 0 | ||
Cash | 3,000 | ||
Balance November 30 | 3,000 |
Rent expense:
Rent expense | |||
Opening balance | 0 | ||
cash | 5,000 | ||
Balance November 30 | 5,000 |
Notes payable account:
Notes payable | |||
Opening balance | 4,000 | ||
Cash | 1,400 | Equipment | 3,500 |
Total | 7,500 | Total | 7,500 |
Balance November 30 | 6,100 |
Common stock account:
Common stock | |||
Opening balance | 7,000 | ||
Cash | 13,000 | ||
Balance November 30 | 20,000 |
Retained earnings account | |||
Opening balance | 900 | ||
Balance November 30 | 900 |
4
Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period. Debit balances are listed in left column and credit balances are listed in right column. The totals of debit and credit column should be equal. Trial balance is useful in the preparation of the financial statements.
To prepare: The trial balance of Incorporation BE.
4
Explanation of Solution
Prepare the trial balance of Incorporation BE:
Incorporation BE | ||
Trial balance | ||
At the end of November | ||
Accounts | Debit($) | Credit($) |
Cash | 22,600 | |
Accounts receivable | 2,600 | |
supplies | 1,700 | |
Equipment | 12,900 | |
Accounts payable | 1,900 | |
Notes payable | 6,100 | |
Common stock | 20,000 | |
Retained earnings | 900 | |
Service revenue | 20,000 | |
Salaries expense | 3,000 | |
Rent expense | 5,000 | |
Utilities expense | 1,100 | |
Total | 48,900 | 48,900 |
Table (2)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $48,900.
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Chapter 2 Solutions
FIN. ACC. (LL) BARUCH EDITION W/ CONNECT
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