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During the month, Gates Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. 1. Accounts Payable 2. Accounts Receivable 3. Cash 4. Fees Earned 5. Insurance Expense 6. Miriam Ramsey, Drawing 7. Utilities Expense
Financial Accounting
Solutions
Financial Accounting
During the month, Gates Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.
- 1. Accounts Payable
- 2. Accounts Receivable
- 3. Cash
- 4. Fees Earned
- 5. Insurance Expense
- 6. Miriam Ramsey, Drawing
- 7. Utilities Expense
Identify whether each of the following account is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.
Explanation of Solution
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.
Description:
1.
- Accounts payable arise when the purchases are made on account.
- As accounts payable is credited when goods and services are purchased on account, and it is debited when the payment is paid to the suppliers, it is likely to have both debit and credit entries.
2.
- Accounts receivable arise when the sales are made on account.
- As accounts receivable is debited when goods, and services are sold on account, and accounts receivable is credited when the payment is received from the customers, it is likely to have both debit and credit entries...
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