•Where do we first record a transaction?
•A. Ledger
•b. Trial balance
•c. Account
•d. Journal
•d
• The journal entry to record a payment on account
will:
• a. Debit Accounts Payable and credit Retained Earnings.
• b. Debit Cash and credit Expenses.
• c. Debit Expenses and credit Cash.
• d. Debit Accounts Payable and credit Cash.
•d
• Purchasing computer equipment for cash will:
•
•
•
•
•d
a. Increase both total assets and total liabilities.
b. Decrease both total assets and stockholders’ equity .
c. Decrease both total liabilities and stockholders’ equity .
d. Have no effect on total assets, total liabilities, or stockholders’ equity .
• Receiving cash from a customer on account will:
•
•
•
•
a. Have no effect on total assets.
b. Increase total assets.
c. Decrease liabilities.
d. Increase stockholders equity .
•A
• Collect Cash won’t affect the Assets, nor the Liabilities, nor the
Stockholders’ Equity.
• Accounting has its own vocabulary and basic relationships. Match the
accounting terms at left with the corresponding definition or meaning at
right.
• H
• A
• C
• D
• J
• I
• B
• F
• G
• E
• The first 7 transactions of Yellow Pages Advertising, Inc., have been posted to the
company’s accounts as follows:
• Prepare the journal entries that served as the sources for the 7 transactions. Include an explanation
for each entry.
• As Yellow Pages moves into the next period, how much cash does the business have? How much does
Yellow Pages owe in total liabilities?
DATE
1.
2.
3.
4.
Journal
ACCOUNT TITLES AND EXPLANATION
5.
DEBIT
Cash…………………………………..
Common Stock…………………..
Issued common stock.
20,000
Cash…………………………………..
Note Payable……………………..
Borrowed money; signed note payable.
7,000
CREDIT
20,000
6.
Cash…………………………………..
Supplies…………………………...
Sold supplies for cash.
100
100
Equipment……………………………
Cash………………………………..
Paid cash for equipment.
8,000
Accounts Payable…………………..
Cash………………………………..
Paid cash on account.
400
8,000
7,000
7.
Land…………………………………..
Cash………………………………..
Note Payable……………………..
Purchased land by paying cash
and signing a note payable.
31,000
Supplies………………………………
Accounts Payable……………….
Purchased supplies on account.
1,000
8,000
23,000
1,000
400
Cash balance = $10,700
($20,000 + $7,000 + $100 − $8,000 − $8,000 − $400)
Company owes = $30,600
($7,000 + $23,000 + $1,000 − $400)
• Adam Lowry , Inc., purchased supplies on account for $5,000. Later
Lowry paid $3,000 on account.
1. Journalize the two transactions on the books of Adam Lowry , Inc. Include
an explanation for each transaction.
2. Open a T -account for Accounts Payable and post to Accounts Payable.
Compute the balance and denote it as Bal.
3. How much does the Lowry business owe after both transactions? In which
account does this amount appear?
• 1.
DATE
Journal
ACCOUNT TITLES AND EXPLANATION
Supplies………………………………..
DEBIT
CREDIT
5,000
Accounts Payable…………………
5,000
Purchased supplies on account.
Accounts Payable……………………
3,000
Cash…………………………………
Paid cash on account.
• 2.
Accounts Payable
3,000
5,000
Bal.
2,000
• 3. The business owes $2,000, as shown in the Accounts Payable account.
3,000
• The accounts of Custom Pool Service, Inc., follow with their normal balances at June
30, 20X6. The accounts are listed in no particular order .
1. Prepare the company’s trial balance at June 30, 20X6.
2. Prepare the financial statement for the month ended June 30, 20X6, that will tell the
company the results of operations for the month.
Custom Pool Service, Inc.
Trial Balance
June 30, 20X6
ACCOUNT
Cash…………………………...
Accounts receivable………..
Land…………………………...
Accounts payable…………..
Note payable…………………
Common stock………………
Retained earnings…………..
Dividends……………………..
Service revenue……………..
Salary expense………………
Utilities expense…………….
Delivery expense……………
Total…………………………...
DEBIT
$ 9,000
15,500
29,000
CREDIT
$ 4,300
13,000
8,500
21,400
6,000
22,000
8,000
1,400
300
$69,200
$69,200
Custom Pool Service, Inc.
Income Statement
Month Ended June 30, 20X6
Service revenue………………...
Salary expense…………………
Utilities expense………………..
Delivery expense……………….
Total expenses………………….
Net income………………………
$22,000
$8,000
1,400
300
9,700
$12,300
The accounts are usually listed in order of their
account number or in balance sheet order starting
with the assets, liabilities, and equity accounts and
ending with income and expense accounts.
• The trial balance of Haigood, Inc., at
September 30, 20X3, does not balance:
• The accounting records hold the following errors:
• Recorded a $1,000 cash revenue transaction by debiting
Accounts Receivable. The credit entry was correct.
• Posted a $1,000 credit to Accounts Payable as $100.
• Did not record utilities expense or the related account
payable in the amount of $200.
• Understated Common Stock by $1,100.
• Omitted Insurance Expense of $1,000, from the trial balance.
• Prepare the correct trial balance at September 30,
20X3, complete with a heading. Journal entries are not
required.
Haigood, Inc.
Trial Balance
September 30, 20X3
ACCOUNT
Cash…………………………...
Accounts receivable………..
Inventory……………………...
Supplies………………………
Land…………………………...
Accounts payable…………..
Common stock………………
Service revenue……………..
Salary expense………………
Insurance expense………….
Rent expense………………...
Utilities expense…………….
Total…………………………...
DEBIT
$ 5,200*
12,000*
17,000
600
55,000
*Explanations:
CREDIT
$13,100*
49,000*
32,100
1,700
1,000
800
900*
$94,200
_______
$94,200
Cash: $4,200 + $1,000 = $5,200
Accounts Receivable: $13,000 − $1,000 = $12,000
Accounts Payable: $12,000 + $1,000 − $100 + $200 = $13,100
Common Stock: $47,900 + $1,100 = $49,000
Utilities Expense: $700 + $200 = $900