PRACTICE SET
LOGIC OF DEBITS AND CREDITS
I.
Instructions:
opposite
the
MERCHANDISE ACCOUNTING
In the space
account
on the
provided,
write
left.
In Part
Purchase
Returns
Sales
Sales Discounts
Accounts
Payable
and Allowances
the letter
of
II, journalize
the account
on the
given the transaction
A.
B.
C.
D.
right
which is
descriptions.
Accounts Receivable
Sales Returns and Allowances
Purchases
Purchase Discounts
II. JOURNAL ENTRIES
Note: L:U:1da SmithI S
business is L:iJ:1daI s Video Showcase.
new
DR.
Jan.
Transaction--->
Description
Jan.
7
Jan.
Jan.
Merchandise
purchased
for
from A. Co. invoice
dated
$5,000 on credit
1/1, terms 2/10,n30.
Returned
$400 of defected
to A. Co. purchased
1/1.
merchandise
Paid A. Co. for purchase
and discount.
of 1/1 less
11
Jan.
Jan.
cash
sales
of
$3,000.
14
Recorded
credit
terms 2/10, n30.
sale
of
$6,000
to B. Co.
B. Co. returned
$200 of merchandise
18
purchased
1/14.
24
Received
payment
less discount.
Feb.
return
12
Recorded
Jan.
CR.
3
from B. Co. less
return,
2
Merchandise
of
Feb.
28
Feb.
28
$4,000,
purchased
terms
from Z. Co. with a value
-
1/10,n30
Paid Z. Co. for purchase
of 2/2 plus
Paid Transportation
charges
merchandise
purchased
2/2.
III.
Instruction:
Net Method.
of
discount
lost.
$30 for
LOGIC OF mCOME STATEMENT
Fill
in the missing
Account Categories.
Gross Sales
Part
- Qr;1erati~
32
~es
I Answers B, C, D,
IV.
INCOME STATEMENT AND BALANCE SHEET
Instructions:
From these randomly ordered accounts prepare an Income Statement, Balance
Sheet, and Closing Entries. Data is in thousands and balances are as of 12/31/95.
Sales Retu=s
and Allowances
11
Merchandise Inventory,
80
December 31, 1995
Purchases
400
Purchase Retu=s
2
and Allowances
Sales Discounts
29
10
Transportation-In
mCOME
Withdrawals
Cash
AccountsReceivable
Office Supplies
PrepaidRent
Capital,Jan. 1, 1995
PurchaseDiscounts
Notes Payable
Merchandise Inventory'
100
January 1, 1995
190
Selling Expenses
Sales
1050
100
Accounts Payable
220
Office Equipment
50
Accumulated Depreciation
General and Administrative
200
Expense
50
50
220
30
100
200
8
200
BALANCE SHEET
STATEMENT
Linda's Video Showcase
Income Statement
Linda's Video Showcase
Balance Sheet
, 1995
, 1995
Sales
Revenue:
Net Sales
$1,010
Cost of Goods Sold:
Merchandise Inventory,
January 1, 1995
$
100
LIABILITIES
Goods Available for Sale
$
500
OWNER
Gross
Profit
Net Income from Operation
$
590
$
2001 1Total
Liabilities
and
Owner's
I
S EQUITY
~
Equity
EiSQ
V. CLOSmG ENTRIES
DR.
Dec.
31 Income
SIJIIITIary
940
CR.
DR.
Dec.
31 Ending
Inventory
Note: Journal Entries are becoming more complicated See page A40 on Understanding Journal
Entries for a logical approach to follow when recording Journal Entries.
33
80
CR.