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Business Accounting Accounting Principles - Standalone book

(a) Periodic System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period. Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. To prepare: Journal entries in the books of C Company. Explanation: C Company purchased goods on account from J Company: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 5 April Purchases 21,000 Accounts payable 21,000 (To record the purchase on account) Explanation: Purchase is an expense account. Since the inventory is purchased, the amount of expense is increased. So, debit the purchase account. Accounts payable is a liability account. Since the inventory purchased on credit (cash not paid), the liability has arises. So, credit the accounts payable account. Paid freight on purchased merchandise: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 6 April Freight-In 800 Cash 800 (To record freight in paid) Explanation: Freight-In is an expense account. Since the amount is paid for freight, the amount of expense is increased. So, debit the Freight-In account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Purchased equipment on account: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 7 April Equipment 26,000 Accounts payable 26,000 (To record the purchase of equipment on account) Explanation: Equipment is an asset account. Since the equipment is purchased, the value of assets is increased. So, debit the equipment account Accounts payable is a liability account. Since the equipment is purchased on credit (cash not paid), the liability has arises. So, credit the accounts payable account C Company returned goods: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 8 April Accounts payable 4,000 Purchase return 4,000 (To record the inventory returned) Explanation: Accounts payable is a liability account. Since the inventory purchased on credit is returned to supplier, the liability has decreased. So, debit the accounts payable account. Purchase return and allowances is a contra-expense account. Since the inventory is returned, the value of expenses is decreased, which is incurred before. So, credit the purchase return and allowance account C Company paid the balance due to J Company: Date Account Title and Explanation Debit ($) Credit ($) 15 April. Accounts Payable 17,000 Purchase Discount 340 Cash 16,660 (To record the payment made within 2/10, n/30 discount period) Explanation: Accounts payable is a liability account. Since the payment is made for accrued expense related to accounts payable, the liability has decreased. So, debit the accounts payable account. Purchase discount is an income account. Since the purchase discount is received from supplier, the income has arises. So, credit the purchase discount account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Working Note: Net Purchase = Purchase − Purchase Returns and Allowances = $ 21 , 000 − 4 , 000 = $ 17 , 000 Purchase discount = Net Purchase × Rate of discount = $ 17 , 000 × 2 100 = $ 340 Net Balance paid = Net Purchase − Purchase Discount = $ 17 , 000 − $ 340 = $ 16 , 660 (b) To prepare: journal to record payment. Explanation: Payment is made after discount period is over, so discount on purchase will be availed. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 4 May. Accounts Payable 17,000 Cash 17,000 (To record the payment made after discount period.) Explanation: Accounts payable is a liability account. Since the payment is made for accrued expense related to accounts payable, the liability has decreased. So, debit the accounts payable account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Working Note: Net Balance paid = Purchase − Purchase Returns and Allowances = $ 21 , 000 − 4 , 000 = $ 17 , 000

(a) Periodic System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period. Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. To prepare: Journal entries in the books of C Company. Explanation: C Company purchased goods on account from J Company: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 5 April Purchases 21,000 Accounts payable 21,000 (To record the purchase on account) Explanation: Purchase is an expense account. Since the inventory is purchased, the amount of expense is increased. So, debit the purchase account. Accounts payable is a liability account. Since the inventory purchased on credit (cash not paid), the liability has arises. So, credit the accounts payable account. Paid freight on purchased merchandise: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 6 April Freight-In 800 Cash 800 (To record freight in paid) Explanation: Freight-In is an expense account. Since the amount is paid for freight, the amount of expense is increased. So, debit the Freight-In account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Purchased equipment on account: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 7 April Equipment 26,000 Accounts payable 26,000 (To record the purchase of equipment on account) Explanation: Equipment is an asset account. Since the equipment is purchased, the value of assets is increased. So, debit the equipment account Accounts payable is a liability account. Since the equipment is purchased on credit (cash not paid), the liability has arises. So, credit the accounts payable account C Company returned goods: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 8 April Accounts payable 4,000 Purchase return 4,000 (To record the inventory returned) Explanation: Accounts payable is a liability account. Since the inventory purchased on credit is returned to supplier, the liability has decreased. So, debit the accounts payable account. Purchase return and allowances is a contra-expense account. Since the inventory is returned, the value of expenses is decreased, which is incurred before. So, credit the purchase return and allowance account C Company paid the balance due to J Company: Date Account Title and Explanation Debit ($) Credit ($) 15 April. Accounts Payable 17,000 Purchase Discount 340 Cash 16,660 (To record the payment made within 2/10, n/30 discount period) Explanation: Accounts payable is a liability account. Since the payment is made for accrued expense related to accounts payable, the liability has decreased. So, debit the accounts payable account. Purchase discount is an income account. Since the purchase discount is received from supplier, the income has arises. So, credit the purchase discount account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Working Note: Net Purchase = Purchase − Purchase Returns and Allowances = $ 21 , 000 − 4 , 000 = $ 17 , 000 Purchase discount = Net Purchase × Rate of discount = $ 17 , 000 × 2 100 = $ 340 Net Balance paid = Net Purchase − Purchase Discount = $ 17 , 000 − $ 340 = $ 16 , 660 (b) To prepare: journal to record payment. Explanation: Payment is made after discount period is over, so discount on purchase will be availed. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) 4 May. Accounts Payable 17,000 Cash 17,000 (To record the payment made after discount period.) Explanation: Accounts payable is a liability account. Since the payment is made for accrued expense related to accounts payable, the liability has decreased. So, debit the accounts payable account. Cash is an asset account. Since the cash is paid, the value of assets is decreased. So, credit the cash account. Working Note: Net Balance paid = Purchase − Purchase Returns and Allowances = $ 21 , 000 − 4 , 000 = $ 17 , 000

Accounting Principles - Standalone book

Accounting Principles - Standalone book

12th Edition

ISBN: 9781118875056

Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

Publisher: WILEY

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Chapter 5, Problem 5.20E

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Accounting Principles - Standalone book

Ch. 5 - Prob. 1Q Ch. 5 - Prob. 2Q Ch. 5 - Prob. 3Q Ch. 5 - Prob. 4Q Ch. 5 - 5. When is cost of goods sold determined in a...Ch. 5 - Prob. 6Q Ch. 5 - Prob. 7Q Ch. 5 - Prob. 8Q Ch. 5 - Prob. 9Q Ch. 5 - Prob. 10Q

Ch. 5 - Prob. 11Q Ch. 5 - Prob. 12Q Ch. 5 - Prob. 13Q Ch. 5 - Prob. 14Q Ch. 5 - Prob. 15Q Ch. 5 - Prob. 16Q Ch. 5 - 17. Identify the distinguishing features of an...Ch. 5 - Prob. 18Q Ch. 5 - Prob. 19Q Ch. 5 - Prob. 20Q Ch. 5 - Prob. 21Q Ch. 5 - Prob. 22Q Ch. 5 - Prob. 23Q Ch. 5 - Prob. 5.1BE Ch. 5 - BE5-2 Presented below are the components in Veasy...Ch. 5 - Prob. 5.3BE Ch. 5 - Prob. 5.4BE Ch. 5 - Prob. 5.5BE Ch. 5 - Prob. 5.6BE Ch. 5 - Prob. 5.7BE Ch. 5 - Prob. 5.8BE Ch. 5 - Prob. 5.9BE Ch. 5 - Prob. 5.10BE Ch. 5 - Prob. 5.11BE Ch. 5 - Prob. 5.12BE Ch. 5 - Prob. 5.13BE Ch. 5 - Prob. 5.14BE Ch. 5 - Prob. 5.15BE Ch. 5 - Prob. 5.16BE Ch. 5 - Prob. 5.1DIE Ch. 5 - Prob. 5.2DIE Ch. 5 - Prob. 5.3DIE Ch. 5 - Prob. 5.4DIE Ch. 5 - Prob. 5.5DIE Ch. 5 - E5-1 Mr. McKenzie has prepared the following list...Ch. 5 - Prob. 5.2E Ch. 5 - Prob. 5.3E Ch. 5 - Prob. 5.4E Ch. 5 - Prob. 5.5E Ch. 5 - Prob. 5.6E Ch. 5 - Prob. 5.7E Ch. 5 - Prob. 5.8E Ch. 5 - Prob. 5.9E Ch. 5 - Prob. 5.10E Ch. 5 - E5-11 An inexperienced accountant for Stahr...Ch. 5 - Prob. 5.12E Ch. 5 - Prob. 5.13E Ch. 5 - Prob. 5.14E Ch. 5 - Prob. 5.15E Ch. 5 - Prob. 5.16E Ch. 5 - Prob. 5.17E Ch. 5 - Prob. 5.18E Ch. 5 - Prob. 5.19E Ch. 5 - Prob. 5.20E Ch. 5 - Prob. 5.21E Ch. 5 - Prob. 5.22E Ch. 5 - Prob. 5.1AP Ch. 5 - Prob. 5.2AP Ch. 5 - Prob. 5.3AP Ch. 5 - Prob. 5.4AP Ch. 5 - Prob. 5.5AP Ch. 5 - Prob. 5.6AP Ch. 5 - Prob. 5.7AP Ch. 5 - Prob. 5.8AP Ch. 5 - Prob. 5.1BYP Ch. 5 - Prob. 5.2BYP Ch. 5 - Prob. 5.3BYP Ch. 5 - Prob. 5.4BYP Ch. 5 - BYPS-5 Three years ago, Amy Hessler and her...Ch. 5 - Prob. 5.6BYP Ch. 5 - Prob. 5.7BYP Ch. 5 - Prob. 5.8BYP Ch. 5 - Prob. 5.1IFRS Ch. 5 - IFRS5-2 For each of the following income statement...Ch. 5 - Prob. 5.3IFRS Ch. 5 - Prob. 5.4IFRS

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