Concept explainers
Videos
Journal: A journal is the complete record of a financial transaction which shows the debit and credit of respective accounts for every transaction including the explanation of the transaction.
T-Accounts: An account is a unique record of increases or decreases in any asset, liability, equity, revenues or expenses. T-accounts are drawn to resemble a T-shape with debit on the left and credit on the right. Assets and expenses have normally debit balances and liability, equity and revenue accounts have normally credit balance.
To analyze:
The given transaction using accounting equation.
Answer to Problem 6QS
The
| Assets | = | Liabilities | + | Owner’s Equity | ||||
| Account | Amount | Account | Amount | Account | Amount | |||
| a | Cash & Equipment | +10,000 | = | 0 | + | Common stock | +10,000 | |
| b | Office Supplies | +500 | = | Accounts Payable | +500 | + | 0 | |
| c | Cash | +4,000 | = | 0 | + | Landscaping Revenue | +4,000 | |
| d | Cash | +1,000 | = | Unearned Landscaping Revenue | +1,000 | |||
Explanation of Solution
a. Total Assets increase by $10,000 and total equity increase by $10,000
b. Assets increase by $500 and liability increases by $500
c. Asset increases by $4,000 and Equity increases by $4,000. Since all revenues are added to Equity and all expenses are deducted from equity balance, to arrive at closing equity, it can be said that revenue ultimately is a part of Equity. So, the revenue has been added to Equity.
d. Asset increases by $1,000 and liability increases by $1,000.
Thus,
Accounting Equation: Accounting equation is also known as balance sheet equation. Accounting equation is based on the principles of double entry system of accounting. The accounting equation is as follows
Journal: A journal is the complete record of a financial transaction which shows the debit and credit of respective accounts for every transaction including the explanation of the transaction.
T-Accounts: An account is a unique record of increases or decreases in any asset, liability, equity, revenues or expenses. T-accounts are drawn to resemble a T-shape with debit on the left and credit on the right. Assets and expenses have normally debit balances and liability, equity and revenue accounts have normally credit balance.
To prepare:
Journal Entries for the given transaction.
Answer to Problem 6QS
| In the books of Elegant LawnsJournal Entries | |||
| Date | Accounts And explanations | Debit $ | Credit $ |
| May 15 | Cash (101) | 7,000 | |
| Equipment(167) | 3,000 | ||
| Common stock(307) | 10,000 | ||
| (Cash and Equipment brought in the business and common stock issued) | |||
| May 21 | Office Supplies(124) | 500 | |
| Accounts Payable(201) | 500 | ||
| (Office supplies purchased on credit) | |||
| May 25 | Cash(101) | 4,000 | |
| Landscaping Revenue(403) | 4,000 | ||
| (Cash received for landscaping Revenue) | |||
| May 30 | Cash(101) | 1,000 | |
| Unearned Landscaping Revenue(236) | 1,000 | ||
| (Cash received for unearned landscaping Revenue) | |||
Explanation of Solution
May 15-Cash & Equipment (Asset) come in and so they are debuted. Common stock (Equity) is issued, so it is credited.
May 21-Office Supplies (Asset) comes into the business, so Office Supplies is debited. Accounts Payable (liability) arises, so Accounts Payable is credited.
May 25-Cash (Asset) comes into the business, so Cash is debited. Landscaping Revenue (Revenue) is generated, so it is credited
May 30- Cash (Asset) comes into the business, so Cash is debited. Unearned Landscaping Revenue (liability) comes into existence, so it is credited.
Thus, the
Accounting Equation: Accounting equation is also known as balance sheet equation. Accounting equation is based on the principles of double entry system of accounting. The accounting equation is as follows
Journal: A journal is the complete record of a financial transaction which shows the debit and credit of respective accounts for every transaction including the explanation of the transaction.
T-Accounts: An account is a unique record of increases or decreases in any asset, liability, equity, revenues or expenses. T-accounts are drawn to resemble a T-shape with debit on the left and credit on the right. Assets and expenses have normally debit balances and liability, equity and revenue accounts have normally credit balance.
To prepare:
T-accounts for the given transactions.
Answer to Problem 6QS
| Cash(101) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 15 | Common Stock | 7,000 | May 30 | Balance c/d | 12,000 |
| May 25 | Landscaping Revenue | 4,000 | |||
| May 30 | Unearned Landscaping Revenue | 1,000 | |||
| 12,000 | 12,000 | ||||
| Office Supplies(124) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 21 | Accounts Payable | 500 | May 30 | Balance c/d | 500 |
| 500 | 500 | ||||
| Equipment(167) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 15 | Common Stock | 3,000 | May 30 | Balance c/d | 3,000 |
| 3,000 | 3,000 | ||||
| Accounts Payable(201) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 30 | Balance c/d | 500 | May 21 | Office Supplies | 500 |
| 500 | 500 | ||||
| Unearned Landscaping Revenue(236) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 30 | Balance c/d | 1,000 | May 30 | Cash | 1,000 |
| 1,000 | 1,000 | ||||
| Common stock(307) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 30 | Balance c/d | 10,000 | May 15 | Cash | 7,000 |
| May 15 | Equipment | 3,000 | |||
| 10,000 | 10,000 | ||||
| Landscaping Revenue(403) | |||||
| Date | Accounts | Amount $ | Date | Accounts | Amount $ |
| May 30 | Income Summary | 4,000 | May 25 | Cash | 4,000 |
| 4,000 | 4,000 | ||||
Explanation of Solution
Cash, Equipment and Office Supplies are Assets, Accounts Payable and Unearned Landscaping Revenue is a liability All Assets, Liabilities and Equity accounts are part of Balance Sheet. So, the balances of all these accounts are carried forward to the Balance Sheet.
The Balance of Landscaping Revenue has been carried forward to the Income summary.
Thus, T-accounts have been prepared.
Want to see more full solutions like this?
Chapter D Solutions
Managerial Accounting (Looseleaf)
- Indicate whether each of the following accounts has a normal debit or credit balance. A. prepaid landscaping expense B. common stock C. delivery vans D. maintenance expense E. retained earnings F. office supplies G. revenue earned H. accounts payable I. unearned painting revenue J. interest payablearrow_forwardFrom the following list, identify which items are considered original sources: A. prepaid insurance B. bank statement C. sales ticket D. general journal E. trial balance F. balance sheet G. telephone bill H. invoice from supplier I. company sales account J. income statementarrow_forwardFrom the following list, identify which items are considered original sources: A. accounts receivable B. receipt from post office for post office box C. purchase order D. general ledger E. adjusted trial balance F. statement of retained earnings G. electric bill H. packing slip I. company expense account J. statement of cash flowsarrow_forward
- For each of the following transactions, state which special journal (Sales Journal, Cash Receipts Journal, Cash Disbursements Journal, Purchases Journal, or General Journal) and which subsidiary ledger (Accounts Receivable, Accounts Payable, neither) would be used in recording the transaction. A. Sold inventory for cash B. Issued common stock for cash C. Received and paid utility bill D. Bought office equipment on account E. Accrued interest on a loan at the end of the accounting period F. Paid a loan payment G. Bought inventory on account H. Paid employees I. Sold inventory on account J. Paid monthly insurance billarrow_forwardIdentify which of the following accounts would be listed on the companys Post-Closing Trial Balance. A. Accounts Receivable B. Accumulated Depreciation C. Cash D. Office Expense E. Note Payable F. Rent Revenue G. Retained Earnings H. Unearned Rent Revenuearrow_forwardWhich of the following pairs of accounts are impacted the same with debits and credits? A. Cash and Unearned Service Revenue B. Electricity Expense and Office Supplies C. Accounts Receivable and Accounts Payable D. Buildings and Common Stockarrow_forward
- For the following accounts please indicate whether the normal balance is a debit or a credit. A. Sales B. Dividends C. Office Supplies D. Retained Earnings E. Accounts Receivable F. Prepaid Rent G. Prepaid Insurance H. Wages Payable I. Building J. Wages Expensearrow_forwardIdentify the financial statement on which each of the following accounts would appear: the income statement (IS), the retained earnings statement (RE), or the Balance Sheet (BS). A. Insurance Expense B. Accounts Receivable C. Office Supplies D. Sales Revenue E. Common Stock F. Notes Payablearrow_forwardMonet Paints Co. is a newly organized business with a list of accounts arranged in alphabetical order, as follows: Construct a chart of accounts, assigning account numbers and arranging the accounts in balance sheet and income statement order, as illustrated in Exhibit 2. Each account number is three digits: the first digit is to indicate the major classification (1 for assets, for example); the second digit is to indicate the subclassification (11 for current assets, for example); and the third digit is to identify the specific account (110 for Cash, 112 for Accounts Receivable, 114 for Merchandise Inventory, etc.).arrow_forward
- For the following accounts indicate whether the normal balance is a debit or a credit. A. Unearned Revenue B. Interest Expense C. Rent Expense D. Rent Revenue E. Accounts Payable F. Cash G. Supplies H. Accounts Payable I. Equipment J. Utilities Expensearrow_forwardIndicate whether each account that follows has a normal debit or credit balance. A. Unearned Revenue B. Office Machines C. Prepaid Rent D. Cash E. Legal Fees Earned F. Salaries Payable G. Dividends H. Accounts Receivable I. Advertising Expense J. Retained Earningarrow_forwardState whether the balance in each of the following accounts increases with a debit or a credit. A. Office Supplies B. Retained Earnings C. Salaries Expense D. Accounts Receivable E. Service Revenuearrow_forward
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub