Concept explainers
(a)
Journal:
Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
Rules of debit and credit:
“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.
Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.
A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances. In trial balance the debit balances are listed in the left column, and credit balances are listed in the right column.
T-Accounts:
T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
To journalize: The transactions that occurred on October 1, 10, and 20.
(a)
Answer to Problem 3.17E
Date | Account Title and Explanation | Debit ($) | Credit ($) |
October. 1 | Cash | 7,000 | |
Common stock | 7,000 | ||
(To record the issuance of common stock ) | |||
October. 10 | Cash | 980 | |
Service revenue | 980 | ||
(To record the cash received for the service performed ) | |||
October. 10 | Cash | 8,000 | |
Notes payable | 8,000 | ||
(To record the cash borrowed by signing a notes ) | |||
October. 20 | Cash | 8,000 | |
Accounts receivable | 8,000 | ||
(To record the cash received for the payment made on account ) | |||
October. 20 | Accounts receivable | 920 | |
Service revenue | 920 | ||
(To record the service performed on account) |
Table (1)
Explanation of Solution
- 1.) Cash is an asset and increased, hence debit cash for $7,000. Common stock is a component of
stockholders’ equity and increased, hence credit common stock for $7,000. - 2.) Cash is an asset and increased, hence debit cash for $980. Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $980.
- 3.) Cash is an asset and increased, hence debit cash for $8,000. Notes payable is a liability and increased, hence credit notes payable for $8,000.
- 4.) Cash is an asset and increased, hence debit cash for $8,000. Accounts receivable is an asset and decreased, hence credit accounts receivable for $8,000.
- 5.) Accounts receivable is an asset and increased, hence debit accounts receivable for $920. Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $920.
(b)
(1)
To Compute: The ending balance of T accounts.
(b)
(1)
Explanation of Solution
Cash | |||
Oct. 1 | $ 7,000 | Oct. 4 | $400 |
10 | $ 980 | 12 | $1,500 |
10 | $ 8,000 | 15 | $250 |
20 | $ 700 | 30 | 300 |
25 | $ 2,000 | 31 | 500 |
Total | $ 18,680 | Total | 2,750 |
Bal. | $ 15,730 |
Table (1)
Accounts Receivable | |||
Oct. 6 | $ 800 | Oct. 20 | $ 700 |
20 | $ 920 | ||
Total | $ 1,720 | ||
Bal. | $ 1,020 |
Table (2)
Supplies | |||
Oct. 4 | $ 400 | Oct. 31 | $ 180 |
Bal. | $ 220 |
Table (3)
Accounts Payable | |||
Oct.12 | $ 1,500 | Oct. 3 | $3,000 |
Bal. | $ 1,500 |
Table (4)
Common Stock | |||
Oct. 1 | $ 7,000 | ||
Oct. 25 | $ 2,000 | ||
Bal. | $ 9,000 |
Table (5)
Equipment | |||
Oct. 3 | $3,000 | ||
Bal. | $3,000 |
Table (6)
Notes Payable | |||
Oct. 10 | $8,000 | ||
Bal. | $8,000 |
Table (7)
Service Revenue | |||
Oct. 6 | $ 800 | ||
Oct. 10 | $ 980 | ||
Oct. 20 | $ 920 | ||
Bal. | $ 2,700 |
Table (8)
Rent Expenses | |||
Oct. 31 | $ 250 | ||
Bal. | $ 250 |
Table (9)
Salaries and wages expenses | |||
Oct. 31 | $ 500 | ||
Bal. | $ 500 |
Table (10)
Supplies Expenses | |||
Oct. 31 | $ 180 | ||
Bal. | $ 180 |
Table (11)
Dividend | |||
Oct. 30 | $ 300 | ||
Bal. | $ 300 |
Table (12)
(2)
To prepare: The trial balance of K Company as on October 31, 2017.
(2)
Explanation of Solution
Corporation K | ||
Trial balance | ||
October 31, 2017 | ||
Debit ($) | Credit ($) | |
Cash | 15,730 | |
Common Stock | 9,000 | |
Equipment | 3,000 | |
Supplies | 220 | |
Accounts Receivables | 1,020 | |
Accounts Payable | 1,500 | |
Notes Payable | 8,000 | |
Dividends | 300 | |
Supplies Expenses | 180 | |
Salaries and wages Expenses | 500 | |
Service Revenue | 2,700 | |
Rent Expenses | 250 | |
Total balance | $21,200 | $21,200 |
Table (1)
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Chapter 3 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
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