ACCOUNTING CYCLE PROBLEM
A. Journal Entries
Cash, an asset, increases and Capital Stock, OE, increases.
Prepaid Rent, asset, increases--it's ours until it's used up.
Cash decreases. Problem tells you which account to debit.
Supplies, asset, increases, A/P, liability, increases. No cash paid at this time.
Debt incurred on Nov 5 now being paid. A/P, liability, decreases and Cash, asset, decreases
Cleaning Service Revenue
We've earned revenue but it hasn't been collected. A/R, asset, increases and
the revenue increases. It's a service revenue because a service was given. Sales is used when
products are sold.
To issue a note means to borrow money. Cash, asset, increases and N/P, liability increases.
It's a note because banks will make you sign. And usually it's you borrowing from the bank,