Brief Exercises BE2 1

For each of the following accounts indicate the effects of (a) a debit and (b) a credit on the accounts and (c) the normal balance of the account. 1. Accounts Payable. 2. Advertising Expense. 3. Service Revenue. 4. Accounts Receivable. 5. B.C. King, Capital. 6. B.C. King, Drawing.

Solution:Effect of the accounts No. 1. 2. 3. 4. 5. 6. Account Account payable Advertising Expense Service Revenue Account Receivable B. C. King, Capital. B. C. King, Drawing. (a) Debit Effect Decrease Increase Decrease Increase Decrease Increase (b) Credit Effect Increase Decrease Increase Decrease Increase Decrease (c) Normal Balance Credit Debit Credit Debit Credit Debit

BE2-2
Transactions for the Kaustav Sen Company for the month of June are presented below. Identify the accounts to be debited and credited for each transaction. June 1 Kaustav Sen invests Tk 4,000 cash in a small welding business of which he is the sole proprietor. 2 Purchases equipment on account for Tk900 3 Tk800 cash is paid to landlord for June rent. 12 Bills J .Kronsnoble Tk300 for welding work done on account

Solution:June 1 2 3 12 Account Debited Cash Equipment Rent expense Account Receivable Account Credited Kaustav Sen, Capital Account payable Cash Service Revenue

BE2-3
Using the data in BE2-2, journalize the transactions.(You may omit explanations.)

Solution:Date 1 2 3 12 Account Titles and Explanations Cash Kaustav Sen, Capital Equipment Account payable Rent Expenses Cash Account Receivable Service Revenue Ref. Debit 4000 900 900 800 800 300 300 Credit 4000

BE2-4
Tem Weber, a fellow student, is unclear about the basic steps in the recording process. Identify and briefly explain the steps in the order in which they occur.

Solution:The basic steps in the recording process are:Step 1:- To analyze each transaction. N this step, business documents are examined to determine the effects of the transaction on the accounts. Step 2:- To enter each transaction in a journal .this step is called journalizing and its results in making a chronological record of the transactions. Step 3:- To transfer journal information to ledger accounts. This step is called posting. Posting makes it possible to accumulate the effect of journalized transactions on individual accounts.

BE2-5
J. A. Motzek has the following transactions during August of the current year. Indicate (a) the effect on the accounting equation and (b) the debit-credit analysis illustrated on pages 5862 of the text. Aug. 1 Opens an office as a financial advisor, investing Tk5,000 in cash. 4 Pays insurance in advance for 6 months,Tk1,800 cash. 16 Receives Tk800 from clients for services provided. 27 Pays secretary Tk1,000 salary.

Solution:Effect and Debit- Credit Analyses (a)Effect on Accounting Equation The assets cash is increased, The owners equity account J.A. Motezek, capital is increased The assets Prepaid Insurance Is increased: ,the asset cash is decreased The assets cash is increased: the revenue Service revenue is decreased. (b) Debit- Credit Analysis Debits increase assets: Debit cash Tk 5000 Credits increase owners equity; Credit J.A. Motezek, Capital Tk5000 Debits increase assets: Debit prepaid insurance Tk 1800 Credits decrease assets: Credit cash Tk 1800 Debits increase assets: Debit cash Tk 800 Credits increase revenue: Credit service revenue Tk 800 Debits increase expense: Debit salaries expenses Tk 1000 Credit decrease assets: Credit cash Tk 1000

Aug 1

Aug 4

Aug16

Aug 27

The expense salaries Expense is increase: The assets cash is decease.

BE2-6
Using the data in BE2-5, Journalize the transactions.(You may omit explanations.)

Solution:Journal Date 1 4 16 27 Account Titles and Explanations Cash J.A. Motezek, Capital Prepaid Insurance Cash Cash Service Revenue Salaries Expense Cash Ref. Debit 5000 1800 1800 800 800 1000 1000 Credit 5000

BE2-7
Selected transactions for the Finney Company are presented in journal form below. Post the transactions to T accounts. Make one T account for each item and determine each accounts ending balance. Date May 5 12 15 Account Titles and Explanation Accounts Receivable Service Revenue (Billed for services provided) Cash Accounts Receivable (Received cash in payment of account) Cash Service Revenue (Received cash for services provided) Ref. Debit 5,000 2,400 2,400 3,000 3,000 Credit 5,000

Solution:Gilles Company T- Accounts Dr. Service revenue May 5, May 15, Balance = Cr. 6000 3000 9000

Dr May 5, May 15, Balance =

.Cash 2400 3000 5400

Cr.

BE2-8
Selected journal entries for the Gilles Company are presented in BE2-7. Post the transactions using the standard form of account.

Solution:Gilles Company Standard Form of Account General Ledger Debit Credit Date Particulars May 5 Account Receivable Account Receivable Account Receivable Account Ref. Tk 6000 May12 Tk 3600 2400 Date Particulars Ref. Tk

Balance

Debit Date Credit Particulars Ref. Tk

Service Revenue Account Date May 5 15 Particulars Service Revenue Service Revenue Balance Ref. Tk 6000 3000 Tk 9000

Debit Credit Date Particulars May12 15 Account Receivable Cash Balance

Cash Account Ref. Tk Date 2400 3000 Tk 5400 Particulars Ref. Tk

BE2-9
From the ledger balances given below, prepare a trial balance for the P.J. Farve Company at June 30,2005. List the accounts in the order shown on page 57 of the text. All account balances are normal. Accounts Payable Tk9,000,Cash Tk6,800, P.J. Farve, Capital Tk20,000; P.J. Farve,DrawingTk1,200; Equipment Tk17, 000, Service Revenue Tk6, 000, Accounts Receivable Tk3, 000, Salaries Expense Tk6, 000, and Rent Expense Tk1, 000.

Solution:P.J. Company Trial Balance June 30, 2005 Account Cash Account Receivable Equipment Accounts Payable P.J. Farve , Capital P. J. Farve Drawing Service Revenue Salaries Expense Rent Expense Total Debit (Tk) Tk 6800 3000 17000 1200 6000 6000 1000 Tk 35000 Tk 35000 Credit (Tk)

Tk 9000 20000

BE2-10
An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance, assuming all account balances are normal. CHENG COMPANY Trial Balance June 30, 2005 Debit Cash Prepaid Insurance Accounts Payable Unearned Revenue P.Cheng,Capital P.Cheng,Drawing Service Revenue Salaries Expense Rent Expense Balance Tk16,800 Tk3,500 3,000 4,200 13,000 4,500 25,600 18,600 Tk39,600 2,400 Tk52,000 Credit

Solution:P.J. Company Trial Balance June 30, 2005 Account Cash Prepaid Insurance Accounts Payable Unearned Revenue P.J. Farve , Capital P. J. Farve Drawing Service Revenue Salaries Expense Rent Expense Total Debit (Tk) Tk16800 3500 Credit (Tk)

Tk3000 4200 13000 4500 25600 18600 2400 Tk 45800 Tk 45800