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Transactions and T accounts The following selected transactions were completed during July of the current year: 1. Billed customers for fees earned, $112,700. 2. Purchased supplies on account, $4,500. 3. Received cash from customers on account, $88,220. 4. Paid creditors on account, $3,100. a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted. b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transaction. c. Assume that the unadjusted trial balance on July 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 2, Problem 9E
Textbook Problem
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Transactions and T accounts

The following selected transactions were completed during July of the current year:

1. Billed customers for fees earned, $112,700.

2. Purchased supplies on account, $4,500.

3. Received cash from customers on account, $88,220.

4. Paid creditors on account, $3,100.

a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted.

b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transaction.

c. Assume that the unadjusted trial balance on July 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred?

(a)

To determine

Journalize the transactions in a two-column journal, using the appropriate number to identify the transactions.

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.

  1. 1. To record the journal entry for fees earned on account:
DateAccount title and explanationPost.Ref.

Debit

($)

Credit ($)
 Accounts receivable 112,700 
     Fees earned  112,700
 (To record the fees earned on account)   

Table (1)

  • Accounts receivable is an asset account, and it is increased. Hence, debit the accounts receivable account by $112,700.
  • Fees earned are the revenue account which is a component of owner’s equity, and they are increased, which in turn has increased the owner’s equity. Hence, credit the fees earned account by $112,700.
  1. 2. To record the purchase of supplies on account:
DateAccount title and explanationPost. Ref.Debit ($)Credit ($)
 Supplies 4,500 
     Accounts payable  4,500
 (To record the purchase of supplies on account)   

Table (2)

  • Supplies are the asset account, and they are increased...

(b)

To determine

Post the entries in (a) to their respective T-accounts.

(c)

To determine

Identify whether the credit balance of accounts receivable in the unadjusted trial balance mean that an error has occurred.

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Chapter 2 Solutions

Financial And Managerial Accounting
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