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Glossary of Terms

Chapter 2
Account A record of increases and decreases in specific asset, liability, or owners equity items. (p-52) A list of accounts and that account numbers that identify their location in the ledger. (p63) A journal entry that involves three or more accounts. (p-59) The right side of an account. (p-52) The left side of an account. (p-52) A system that records in appropriate accounts the dual effect of each transaction. (p-53) The most basic form of journal. (p-58) A ledger that contains all asset, liability, and owners equity accounts. (p-60) An accounting record in which transactions are initially recorded in chronological order. (p-58) The entering of transaction data in the journal. P-58) The entire group of accounts maintained by a company. (p-60) An account balance on the side where an increase in the account is recorded. (p-54) The procedure of transferring journal entries to the ledger accounts. (p-61) A journal entry that involves only two accounts. (p-59) The basic form of an account. (p-52)

Chart of accounts

Compound entry Credit Debit Double-entry system General journal General ledger Journal

Journalizing Ledger Normal balance Posting Simple entry T account

Three-column form of account A form with columns for debit, credit, and balance amounts in an account. (p-61) Trial balance A list of accounts and their balances at a given time. (p-70)

Self-Test Questions
Chapter 2
1. Which of the following statements about an account is true? a. In its simplest form, an account consists of two parts. b. An account is an individual accounting record of increases and decreases in specific asset, liability, and owners equity items. c. There are separate accounts for specific assets and liabilities but only one account for owners equity items. d. The left side of an account is the credit or decrease side. 2. Debits: a. Increase both assets and liabilities b. Decrease both assets and liabilities. c. Increase assets and decrease liabilities. d. Decrease assets and increase liabilities. 3. A revenue account: a. Is increased by debits. b. Is decreased by credits. c. Has a normal balance of a debit. d. Is increased by credits. 4. Accounts that normally have debit balances are: a. Assets, expenses, and revenues. b. Assets, expenses, and owners capital. c. Assets, liabilities, and owners drawings. d. Assets, owners drawings, and expenses. 5. The expanded accounting equation is: a. Assets + Liabilities = Owners Capital + Owners Drawings _ Revenue + Expenses b. Assets = Liabilities + Owners Capital + Owners Drawings + Revenues Expenses c. Assets = Liabilities Owners Capital Owners Drawings Revenues Expenses d. Assets = Liabilities + Owners Capital Owners Drawings + Revenues Expenses 6. Which of the following is not part of the recording process? a. Analyzing transactions b. Preparing a trial balance. c. Entering transactions in a journal. d. Posting transactions. 7. Which of the following statements about a journal is false? a. It is not a book of original entry. b. It provides a chronological record of transactions. c. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. d. It discloses in one place the complete effect of a transaction. 8. The purpose of supplies on account should result in: a. A debit to Supplies Expense and a credit to Cash. b. A debit to Supplies Expense and a credit to Accounts Payable.

c. A debit to Supplies and a credit to Accounts Payable. d. A debit to Supplies and a credit to Accounts Receivable. 9. The order of the accounts in the ledger is: a. assets, revenues, expenses, liabilities, owners capital, owners drawings. b. assets, liabilities, owners capital, owners drawings, revenues, expenses. c. owners capital, assets. revenues, expenses, liabilities, owners drawings. d. revenues, assets, expenses, liabilities, owners capital, owners drawings. 10. A ledger: a. contains only asset and liability accounts. b. should show accounts in alphabetical order. c. is a collection of the entire group of accounts maintained by a company. d. is a book of original entry. 11. Posting: a. normally occurs before journalizing. b. transfer ledger transaction data to the journal. c. is an optional step in the recording process. d. transfer journal entries to ledger accounts. 12. Before posting a payment of $5,000, the Accounts Payable of Senator Company had a normal balance of $16,000. The balance after posting the transaction was: a. $21,000 b. $5,000 c. $11,000 d. Cannot be determined. 13. A trial balance: a. is a list of accounts with their balances at a given time. b. proves the mathematical accuracy of journalized transactions. c. will not balance if a correct journal entry is posted twice. d. proves that all transactions have been recorded. 14. A trial balance will not balance if: a. a correct journal entry is posted twice. b. the purchase of supplies on account is debited to Supplies and credited to Cash. c. a $100 cash drawing by the owner is debited to Owners Drawings for $1,000 and credited to Cash for $100. d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45. 15. The trial balance of Clooney Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owners Capital $42,000, Owners Drawings $15,000, Equipment $61,000. In preparing a trial balance, the total in the debit column is: a. $131,000 b. $216,000 c. $91,000 d. $116,000. IFRS1. Which statement is correct regarding IFRS? a. IFRS reverses the rules of debits and credits, that is, debits are on the right and credits on the left. b. IFRS uses the same process for recording transactions as GAAP. c. The chart of accounts under IFRS is different because revenues follow assets. d. None of the above statements are correct.

IFRS2. The expanded accounting equation under IFRS is as follows: a. Assets = Liabilities + Owners Capital + Owners Drawings + Revenues Expenses b. Assets + Liabilities = Owners Capital + Owners Drawings + Revenues Expenses c. Assets = Liabilities + Owners Capital Owners Drawings + Revenues Expenses d. Assets = Liabilities + Owners Capital + Owners Drawings Revenues Expenses IFRS3. A trial balance: a. Is the same under IFRS and GAAP. b. Proves that transactions are recorded correctly. c. Proves that all transactions have been recorded. d. Will not balance if a correct journal entry is posted twice. IFRS4. One difference between IFRS and GAAP is that: a. GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basic of accounting. b. IFRS uses a different posting process than GAAP c. IFRS uses more fair value measurements than GAAP. d. The limitations of a trial balance are different between IFRS and GAAP. IFRS5. The general policy for using proper currency signs (dollar, yen, pound, etc.) is the same for both IFRS and this textbook. The policy is as follows: a. Currency signs only appear in ledgers and journal entries. b. Currency signs are only shown in the trial balance. c. Currency signs are shown for all compound journal entries. d. Currency signs are shown in trial balances and financial statements.

Self-Test Questions from Website


S-T1. The left side of an account a. Is always the balance side b. May represent the debit side or the credit side c. Is always the debit side d. Is always the credit side Accounts that normally have debit balances are a. assets, expenses, and revenues b. assets, expenses, and owner's capital. c. assets, liabilities, and owner's drawings. d. assets, owner's drawings, and expenses. Correct! Assets, owner's drawings, and expenses all have normal debit balances Which of the following is not part of the recording process? a. analyzing transactions b. preparing a trial balance. c. entering transactions in a journal. d. posting transactions. Correct! Preparing the trial balance is not part of the recording process. On October 3, Nick Carter, a carpenter, received a cash payment for services previously billed to a client. Nick paid his telephone bill and bought equipment on credit. For the three transactions, at least one of the entries will include a a. credit to Nick Carter, Capital.

S-T2.

S-T3.

S-T4.

b. credit to Notes Payable. c. debit to Accounts Payable. d. credit to Accounts Payable. Correct! The purchase of equipment on credit involves a debit to Equipment and a credit to Accounts Payable. S-T5. Management could determine the amounts due from customers by examining which ledger account? a. Service Revenue b. Accounts Payable c. Accounts Receivable d. Supplies Correct! Amounts due from customers can be obtained by examining the Accounts Receivable ledger account. S-T6. Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was a. $21,000. b. $5,000. c. $11,000. d. cannot be determined. Correct! The balance is $11,000 = $16,000 (normal balance) - $5,000 (payment). S-T7. A trial balance would only help in detecting which one of the following errors? a. A transaction that is not journalized. b. A journal entry that is posted twice. c. Offsetting errors made in recording the transaction. d. A transposition error when transferring the debit side of the journal entry to the ledger. Correct! A trial balance will not detect entries not journalized, entries posted twice, or any offsetting errors made in recording transactions. S-T8. Which of the following statements about an account is true? a. In its simplest form, an account consists of two parts. b. An account is an individual accounting record of increases and decreases in specific asset, liability, and owner's equity items. c. There are separate accounts for specific assets and liabilities but only one account for owner's equity items. d. The left side of an account is the credit or decrease side. Correct! This is a true statement about an account. S-T9. A credit to a liability account indicates a(n) a. debit was made to an asset account. b. decrease in the liability. c. increase in the liability. d. error. Correct! A credit to a liability account indicates an increase in the liability ("Assets and Liabilities"). S-T10. The second step in the recording process is a. preparing a trial balance. b. analyzing a transaction. c. posting to the general ledger. d. journalizing a transaction. Correct! The second step in the recording process is entering a transaction in a journal. S-T11. Entering transaction data in the journal is known as a. posting.

b. journalizing. c. balancing. d. recording. Correct! Entering transaction data in the journal is known as journalizing ("Journalizing"). S-T12. The order of the accounts in the ledger is a. assets, revenues, expenses, liabilities, owner's capital, owner's drawing. b. assets, liabilities, owner's capital, owner's drawing, revenues, expenses. c. owner's capital, assets, revenues, expenses, liabilities, owner's drawing. d. revenues, assets, expenses, liabilities, owner's capital, owner's drawing. Correct! The correct order of the accounts in the ledger is: assets, liabilities, owner's capital, owner's drawing, revenues, expenses. S-T13. The purchase of supplies on account should result in: a. a debit to Supplies Expense and a credit to Cash. b. a debit to Supplies Expense and a credit to Accounts Payable. c. a debit to Supplies and a credit to Accounts Payable. d. a debit to Supplies and a credit to Accounts Receivable. Correct! The purchase of supplies on account results in a debit to Supplies and credit to Accounts Payable. S-T14. The trial balance of Kelso Company had accounts with the following normal balances: Cash, $8,000; Accounts Receivable, $6,000; Equipment, $10,000; Accounts Payable, $9,000; Owner's Capital, $15,000; Owner's Drawing, $500; Service Revenue, $7,000; Rent Expense, $1,000; Salaries and Wages Expense, $3,000; and Advertising Expense, $2,500. In preparing the trial balance, the total in the debit column is a. $40,000. b. $31,000. c. $31,500. d. $39,000. Correct! Cash ($8,000) + Accounts Receivable ($6,000) + Equipment ($10,000) + Owner's Drawing ($500) + Rent Expense ($1,000) + Salaries and Wages Expense ($3,000) + Advertising Expense ($2,500) ("The Trial Balance").

Summary of Study Objectives


Chapter 2
1. Explain what an account is and how it helps in the recording process. An account is a record of increases and decreases in specific asset, liability, and owners equity items. 2. Define debits and credits and explain their use in recording business transactions. The terms debit and credit are synonymous with left and right. Assets, drawings, and expenses are increased by debits and decreased by credits. Liabilities owners capital, and revenues are increased by credits and decreased by debits. 3. Identify the basic steps in the recording process. The basic steps in the recording process are: (a) analyze each transaction for its effects on the accounts. (b) enter the transaction information in a journal, (c) transfer the journal information to the appropriate accounts in the ledger. 4. Explain what a journal is and how it helps in the recording process. The initial accounting record of a transaction is entered in a journal before the data are entered in the accounts. A journal: (a) discloses in one place the complete effects of a transaction, (b) provides a chronological record of transactions, and (c) prevents or locates errors because the debit and credit amounts for each entry can be easily compared. 5. Explain what a ledger is and how it helps in the recording process. The ledger is the entire group of accounts maintained by a company. The ledger keeps in one place all the information about changes in specific account balances. 6. Explain what posting is and how it helps in the recording process. Posting is the transfer of journal entries to the ledger accounts. this phase of the recording process accumulates the effects of journalized transactions in the individual accounts. 7. Prepare a trial balance and explain its purposes. A trial balance is a list of accounts and their balances at a given time. Its primary purpose is to prove the equality of debits and credits after posting. A trial balance also uncovers errors in journalizing and posting and is useful in preparing financial statements.

Questions (Page 78)


Chapter 2
1. Describe the parts of a T account. a. A T account consists of two sides- debits on the left and credits on the right. 2. The terms debit and credit mean increase and decrease, respectively. Do you agree? Explain. a. No. A debit/credit can be an increase/decrease depending on what account they are in. The terms debit and credit mean left and right respectively. 3. Jeff Hiller, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Jeff correct? Explain. a. No, a transaction should not be recorded twice. The double-entry system relates back to the basic accounting equation, that both sides must balance. 4. Maria Alvarez, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Maria correct? Discuss. a. No. Depends on account. See #2. 5. State the rules of debit and credit as applied to (a) asset accounts, (b) liability accounts, and (c) the owners equity accounts (revenue, expenses, owners drawings, and owners capital). a. Increases are debits, decreases are credits b. Increases are credits, decreases are debits c. Revenue- Increases are credits, decreases are debits. Expenses- Increases are debits, decreases are credits. Owners Drawings- Increases are debits, decreases are credits. Owners Capital- Increases are credits, decreases are debits. 6. What is the normal balance for each of the following accounts? a. Accounts Receivable Debit Balance b. Cash Debit Balance c. Owners Drawings Debit Balance d. Accounts Payable Credit Balance e. Service Revenue Credit Balance f. Salaries and Wages Expense Debit Balance g. Owners Capital Credit Balance 7. Indicate whether each of the following accounts is an asset, a liability, or an owners equity account and whether it has a normal debit or credit balance a. Accounts Receivable: Asset, Normal Debit

8.

9.

10. 11.

12.

13. 14.

b. Accounts Payable Liability, Normal Credit c. Equipment Asset, Normal Debit d. Owners Drawings OE, Normal Debit e. Supplies Asset, Normal Debit For the following transactions, indicate the account debited and the account credited. a. Supplies are purchased on account. Supplies expenses debited, accounts payable credited b. Cash is received on signing a note payable. Cash debited, Notes Payable credited c. Employees are paid salaries in cash. Employees and Wages Expense debited, Cash credited. Indicate whether the following accounts generally will have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries a. Cash: c b. Accounts Receivable: c c. Owners Drawings: a d. Accounts Payable: c e. Salaries and Wages Expense: a f. Service Revenue: b What are the basic steps in the recording process? 1) Analyze transactions, 2) Enter into journal, 3) Transfer journal to ledger. What are the advantages of using a journal in the recording process? It discloses in one place the complete effects of a transaction. It provides a chronological record of all transactions. It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared. (a) When entering a transaction in the journal, should the debit or credit be written first? (b) Which should be indented, the debit or credit? The debit should be entered first. The credit should be indented. Describe a compound entry, and provide an example. An entry where debits/credits are increased/decreased from more than 2 accounts. (a) Should business transaction debits and credits be recorded directly in the ledger accounts? (b) What are the advantages of first recording transactions in the journal and then posting to the ledger? No. The advantages are 1) it discloses in one place the complete effects of a transaction 2) It provides a chronological record of all transactions. 3) It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.

15. The account number is entered as the last step in posting the amounts from the journal to the ledger. What is the advantage of this step? The advantage is to indicate that the item has been posted. 16. Journalize the following business transactions. a. Hector Molina invests $9,000 cash in the business. b. Insurance of $800 is paid for the year. c. Supplies of $2,000 are purchased on account. d. Cash of $7,500 is received for services rendered. 17. (a) What is a ledger? (b) What is a chart of accounts and why is it important? A ledger is the entire group of accounts maintained by a company. A chart of accounts is a list of accounts and that account numbers that identify their location in the ledger. It helps organize the accounts and define the level of detail that a company desires in its accounting system. 18. What is a trial balance and what are its purposes? A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to check that the debits equal the credits after posting. 19. Jim Benes is confused about how accounting information flows through the accounting system. He believes the flow of information is as follows. Is Jim correct? If not, indicate to Jim the proper flow of the information. (a) Debits and credits posted to the ledger (b) Business transaction occurs (c) Information entered in the journal (d) Financial statements prepared (e) Trial balance is prepared. No- b, c, a, e, d 20. Two students are discussing the use of a trial balance. They wonder whether the following errors, each considered separately, would prevent the trial balance from balancing. (a) The bookkeeper debited Cash for $600 and credited Salaries and Wages Expense for $600 for payment of wages. (b) Cash collected on account was debited to Cash for $900 and Service Revenue was credited for $90. What would you tell them? a- Would balance b- Would NOT balance 21. What are the normal balances for PepsiCos Cash, Accounts Payable, and Interest Expense accounts? The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.

Brief Exercises
Chapter 2
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 A debit decreases Accounts Payable. (b) A credit Increases Accounts Payable. (c) Normal Credit. 2. Advertising Expense A debit increases Advertising Expense. (b) A credit decreases Advertising Expense. (c) Normal Debit. 3. Service Revenue A debit decreases Service Revenue. (b) A credit Increases Service Revenue. (c) Normal Credit. 4. Accounts Receivable A debit increases Accounts Receivable. (b) A credit decreases Accounts Receivable. (c) Normal Debit. 5. Owners Capital A debit decreases Owners Capital. (b) A credit Increases Owners Capital. (c) Normal Credit 6. Owners Drawings A debit increases Owners Drawings. (b) A credit decreases Owners Drawings. (c) Normal Debit. BE2-2 Transactions for the Daniel Hudson Company for the month of June are presented below. Identify the accounts to be debited and credited for each transaction. June 1 Dan Hudson invests $5,000 cash in a small welding business of which he is the sole proprietor. 2 Purchases equipment on account for $2,100. 3 $800 cash is paid to landlord for June rent. 12 Bills O. Guillen $300 for welding work done on account. Debit $5,000 Credit

Cash

Owners Capital $5,000 Equipment Expense 2,100 Accounts Payable 2,100 Rent Expense 800 Cash 800 Accounts Receivable 300 Service Revenue 300 BE2-3 Using the data in BE2-2, journalize the transactions. (You may omit explanations.) See above BE2-4 Kenny Williams 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. 1) Analyze transactions 2) Record transactions in journal 3) Transfer journal to ledger (posting) BE2-5 J. Reinsdorf 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 64-68 of the text. Aug 1 Opens an office as a financial advisor, investing $8,000 in cash.

Credits increase Owners Equity, credit Owners Equity $8,000. Debits increase Assets, debit assets $8,000. 4 Pays insurance in advance for 6 months, $1,800 cash. Debits increase prepaid Insurance, increase Prepaid Insurance $1,800. Credits decrease Cash, decrease cash $1,800. 16 Receives $3,400 from clients for services provided. Debits increase Cash, debit Cash $3,400. Credits increase Service Revenue, credit Service Revenue $3,400. 27 Pays secretary $1,000 salary. Debits increase Wage Expenses, debit Wage Expenses $1,000. Credits decrease Cash, decrease Cash $1,000. BE2-6 Using the data in BE2-5, journalize the transactions. (You may omit explanations.)

GENERAL JOURNAL
Date 2012 Aug 1 Aug 4 Account Titles and Explanation Cash Ref Debit $8,000 $8,000 1,800 1,800 3,400 3,400 1,000 1,000 Credit

Owners Capital Prepaid Insurance Cash Aug 16 Cash Service Revenue Aug 27 Salary & Wages Expense Cash

BE2-7 Selected transactions for the Anthony Adams 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.

Cash
May 12 15 $2,400 3,000 $5,400

101

Accounts Receivable 112


May 5 $4,100 $1,700 May 12 $2,400

Service Revenue 400


May May 5 15 $4,100 3,000 $7,100

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

CASH
Date
May 12 15

101
Debit
$2,400 3,000

Explanation

Ref.

Credit

Balance
$2,400 $5,400

Accounts Receivable
Date
May 5 12

112
Credit
$2,400

Explanation

Ref.

Debit
$4,100

Balance
$4,100 $1,700

Service Revenue
Date
May 5 15

400
Credit
$4,100 3,000

Explanation

Ref.

Debit

Balance
$4,100 $7,100

BE2-9 From the ledger balances given below, prepare a trial balance for the Afalava Company at June 40, 2012. List the accounts in the order shown on page 63 of the text. All account balances are normal. Accounts Payable $9,000, Cash $5,800, Owners Capital $15,000, Owners Drawings $1,200, Equipment $17,000, Service Revenue $10,000, Accounts Receivable $3,000, Salaries and Wages Expense $6,000, and Rent Expense $1,000.

COMPANY NAME Trial Balance June 30,2012


Debit
Cash Accounts Receivable Equipment Accounts Payable Owners Capital Owners Drawings Service Revenue Salaries and Wages Expense Rent Expense $5,800 3,000 17,000 $9,000 15,000 1,200 10,000 6,000 1,000 34,000

Credit

34,000

BE2-10 An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance, assuming all account balances are normal.

WALTER COMPANY Trial Balance 31-Dec-12


Debit
Cash Prepaid Insurance Accounts Payable Unearned Service Revenue Owners Capital Owners Drawings Service Revenue Salaries and Wages Expense Rent Expense $10,800 3,500 $3,000 $2,200 9,000 4,500 25,600 18,600 2,400 $39,800

Credit

$39,800

Brief Exercises
Chapter 2
E2-1. Johan Aslata has prepared the following list of statements about accounts. Identify each statement as true or false. If false, indicate how to correct the statement. 1. An account is an accounting record of either a specific asset or a specific liability. False. An account is an accounting record of a specific asset, liability, or owners equity item. 2. An account shows only increases, not decreases, in the item it relates to. False. An account shows increases and decreases in the item it relates to. 3. Some items, such as Cash and Accounts Receivable, are combined into one account. False. Each asset, liability, and owners equity item has a separate account . 4. An account has a left, or credit side, and a right, or debit side. False. An account has a left, or debit side, and a right, or credit side. 5. A simple form of an account consisting of just the account title, the left side, and the right side, is called a T-account. True. Selected transactions for M. Anderson, an interior decorator, in her first month of business, are as follows. For each transaction, indicate the following. (a) The basic type of account debited and credited (asset, liability, owners equity) (b) The specific account debited and credited (cash, rent expense, service revenue, etc.) (c) Whether the specific account is increased or decreased. (d) The normal balance of the specific account. Account Debited (b) Specific (c) Account Effect Cash Increase Equipment Supplies Acct. Rec. Expenses Cash Acct. Pay Owner Dr. Increase Increase Increase Increase Increase Decrease Increase Account Credited (b) Specific (c) Account Effect Owner Cap Increase Cash Acct. Pay Revenue Cash Acct. Rec. Cash Cash Decrease Increase Increase Decrease Decrease Decrease Decrease

E2-2.

Date Jan. 2 3 9 11 16 20 23 28 E2-3.

(a) Basic Type Asset Asset Asset Asset OE Asset Liability OE

(d) Normal Balance Debit Debit Debit Debit Debit Debit Credit Debit

(a) Basic Type OE Asset Liability OE Asset Asset Asset Asset

(d) Normal Balance Credit Debit Credit Credit Debit Debit Debit Debit

Data for M. Anderson, interior decorator, are presented in E2-2. Journalize the transactions using journal page J1. (You may omit explanations.)

GENERAL JOURNAL
Date Account Titles and Explanation Jan. 2 Cash Owner's Capital 3 Equipment Cash 9 Supplies Accounts Payable 11 Accounts Receivable Service Revenue 16 Advertising Expense Cash 20 Cash Accounts Receivable 23 Accounts Payable Cash 28 Owners Drawings Cash Ref J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 Debit $ 10,000 $ 4,000 4,000 500 500 2,100 2,100 350 350 700 700 300 300 1,000 1,000 Credit 10,000

E2-6.

Barnes Industries had the following transactions. (a) Indicate what accounts are increased and decreased by each transaction. (b) Journalize each transaction. (Omit explanations.) 1. Borrowed $5,000 from the bank by signing a note. Notes Payable INCREASED (credited), Cash INCREASED (debited) 2. Paid $3,100 cash for a computer. Equipment INCREASED (debited), Cash DECREASED (credited) 3. Purchased $850 of supplies on account. Supplies INCREASED (debited), Accounts Payable INCREASED (credited) Cash Notes Payable Equipment Cash Supplies Accounts Payable $ 5,000 $ 3,100 3,100 850 850 5,000

E2-7.

Beekman Industries had the following selected transactions. (a) Indicate the effect each transaction has on the accounting equation (Assets = Liabilities + Owners Equity), using plus and minus signs. (b) Journalize each transaction. (Omit explanations.) 1. Jo Beekman invested $4,000 cash in the business. Increased Assets, Increased OE 2. Paid office rent of $950. Decreased Assets (Cash), Decreased OE (Expenses)

3. Performed consulting services and billed a client $5,200. Increased Assets (Accounts Receivable), Increased OE (Service Revenue) 4. Jo Beekman withdrew $750 cash for personal use. Decreased Assets (Cash), Decreased OE (Owners Drawings) Cash Owner's Capital Rent Expense Cash Accounts Receivable Service Revenue Owner's Drawings Cash $ 4,000 $ 4,000 950 950 5,200 5,200 750 750

E2-14. The accounts in the ledger of Bullucks Delivery Service contain the following balances on July 31, 2012. Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the missing amount for Cash. Accounts Receivable Accounts Payable Cash Equipment Gasoline Expense Insurance Expense Notes Payable $ 7,642 8,396 ? 49,360 758 523 17,000 Prepaid Insurance Maintenance and Repairs Expense Service Revenue Owners Drawings Owners Capital Salaries and Wages Expense Salaries and Wages Payable $ 1,968 961 10,610 700 42,000 4,428 815

Bullucks Delivery Service Trial Balance 31-Jul-12


Debit
Cash Accounts Receivable Prepaid Insurance Equipment Notes Payable Accounts Payable Salaries and Wages Payable Owners Capital Owners Drawings Service Revenue Salaries and Wages Expense Maintenance and Repairs Expense Insurance Expense Gasoline Expense $ 12,481.00 7,642 1,968 49,360 $ 17,000 8,396 815 42,000 10,610 4,428 961 523 758 78,821

Credit

700

78,821