chapter_2_the_recording_process

chapter_2_the_recording_process - THE RECORDING PROCESS...

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Unformatted text preview: THE RECORDING PROCESS Chapter 2 2—1 The rules of debits and credits. a) Label each side of the T accounts as follows: 1. debit and credit, 2. increase and decrease, and 3. normal balance. Owner's Owner's Assets = Liabilities + Ca ital - Drawing + Revenues - - Debit Debit Livo‘rpehn red-roam Cfe JATDebit aedr Cred 7L -— — +— ~-— + 1* -/ T” l— “’ ‘ ’\ we. “('5‘ M3 ’93 MB. b) What do the terms debit and credit mean? Debit is lefi side of an account and Credit is the left side of the account. 2—2 Classifying accounts and identifying debit and credit effects. For each of the ledger accounts listed below, indicate (1) the basic type of account (A)sset, (L)iability, or (O)wner’s equity. If the basic type is (O)wner’s Equity also indicate if it is (C)apital, (D)rawing, (R)evenue, or (E)xpense; (2) whether it is increased or decreased by a debit or credit, and (3) the normal balance of the specific account. Basic Increased Decreased Normal Type By By Balance a) Cash Asset Debit Credit Debit b) Building Asset Debit Credit Debit c) Notes payable Liability Credit Debit Credit d) J. Day, Capital Liability Credit Debit Credit Chapter 2 — The Recording Process Page 15 g) h) j) k) 1) Accounts receivable Land Supplies Accounts payable Insurance expense Admission revenue Advertising expense Unearned revenue Prepaid insurance Utilities expense J. Day, Drawing Basic Type Asset Asset Asset Liability Expense-0.13 Revenue- O.E. Expense-0.13 Liability Asset Expen se—O. E Drawing— O.E Increased By Debit Debit Debit Credit Debit Credit Debit agar 2‘1"— Debit Debit Decreased By Credit Credit Credit Debit Credit Debit C’Qéid {T %b béb‘F‘l” @— Credit Credit Credit 2-3 Recording transactions in T accounts and preparing a trial balance. Normal Balance Debit Debit Debit Credit Debit Credit Debit Credit ’GPJL g eno‘rr gage:— Bill Fence is the owner of Microhard Sofiware Company which opened on January 1, 2009. During January, the following transactions occurred. Jan. 1 Bill Fence invests $10,000 into the business. Jan. 2 Received $2,000 cash from customers for software programming services it provided. Jan. 3 Incurred $300 of advertising costs in the Global News on account. Jan. 4 Provided customers with prograrmning services on account, $3,500. 2 Jan. 5 Paid the following expenses for J anuary: salaries to employees $2,500, utilities $400. . Jan. 6 Bill Fence withdrew $1,500 cash for personal use. Jan. 7 Collected $1,000 cash for services billed on J an. 4. Jan. 8 Borrowed $5,000 from National Bank on a note payable. Jan. 9 Paid the amount owed to Global News for advertising on Jan. 3. Page 16 Chapter 2 — The Recording Process a) Label the debit and credit columns on the T account below. b) Circle Dr. or Cr. to indicate the normal balance. c) Record the February transactions in the following T accounts. Notes Pa a Service Revenu Salaries Ex ense -—-——-——-—————————.—___—___ Chapter 2 — The Recording Process Page 17 .- 0 0 . a w w , 0 n7 I m——m———__——m—————m——m——m——m_———— n.— - u..--------------- w M a» w o o , a 0, 3 0U! U! r” M 1 9 , . 2 , , ..... General Journal Account Titles 4.4“1 / , . a . I . I p l 4. AI , , . I, M ._ , a , . . . . ; _. I . , . . I ,“ Jflw._ & , a I ’ I; 4 . 4 o . 4 A , a . _, . . o “A . 4. J. . ._ v .4 4 / 4 I , ._ r _ , I . I . IO M'. y ’ A. l 4 g m 4 a. . , / ' r _ I . r— , 1 n p L ; r I MIIal-uiIMIIEIII-fil-IIIEIln-IH-IHIII-II 0&7 d) Record the transactions in part c in general journal format. "a! - - - - - - - - - - - - - - - - ' - - - =- - - - - - - - - - - - - - - - - - '_.___ Chapter 2 — The Recording Process Page 18 e) Prepare a trial balance for Microhard Sofiware Company at January 31, 2009. 2—4 Preparing journal entries in a two-column general journal. Five transactions are summarized in the table below. Record each of the transactions (a) through (e) in the two-column journal that follows the table. Use the transaction letter for the date. OWNER’S , ASSETS = LIABILITIES + EQUITY Accounts —— , _ 9,000 1,000 10,000 9,000 1,500 500 10,000 - +$700 700 Chapter 2 - The Recording Process Page 19 Account Titles Ref. General Journal Page 1 _10 000-. H ---=m _.:..‘_.’ -—- --_-_-— -l-_-m --—-_-—- HIM-.— --—--—-— Ml-rm' ' ' "5-.— -- r .m..__- --—_-— ' - 300 .— ---‘E"_—-m --—_-_ --—-_-- --_—--I --——-_I --——-—- --_---_ 2—5 Recording journal entries, posting to ledger and preparing a trial balance. a) Prepare journal entries for the following transactions for Wiley Photography Studio for the month of January 2009. (You may omit thousands.) January 1 J. J. Wiley invested $20,000 cash in the business. 2 Paid rent for January, $3,000. 3 Purchased $12,000 of equipment, paying $2,000 cash and the balance on a note payable. 4 Paid $1,000 for a one-year insurance policy. 5 Received $1,000 cash advance from a customer for photography services to be performed in June. 6 Purchased supplies on account $1,000. 7 Received $4,000 cash for photography services completed. 10 Earned $11,000 for photography services rendered, but not yet received. 21 Collected $9,000 cash for January 10 services. 30 Paid assistant's wages for January, $2,000. 31 Withdrew $6,000 for personal use. Page 20 Chapter 2 — The Recording Process Page 1 Credit 0 00 o o 0 b D o o o u 0 I 0 b M D u % M :2 w I I U. 6 O o w o o o o O . O O o M 91 M w o . o 3 I I I U. N. la mum-mn-mnu-un—mm-my-um-ag-mm-mn-mn--- General Journal Account Titles E-‘bmmfl’ —- I CI 1, o, . . fl . . , ‘ l._‘ . t . h. I p . ., , h , ‘ v .1 o , n m ,7 , H w w“ u, H P I l I I M Liiglllmllfillm nan-unnm-nan—m————— ---- ------ Date 0 I 7- Page 21 Chapter 2 — The Recording Process b) Post the journal entries made in part a) to the following ledger accounts. General Ledger —-—— - um: I 000 N\‘~ wé“: 5o 0 9o 0 O 3 Ili- —- 3271—.- I—ll —- Ema—n / coo --—- I — PREPAID INSURANCE -—— Momma-6 DATE Ref DEBIT CREDIT BALANCE Q — - Ref - EEJ _ Account No. 10 CREDIT BALANCE I MD - ” Accunt No. 30 ’ 21W] -- _ Page 22 Chapter 2 — The Recording Process 2,8“an COUNTSPY - ' — ount .31 - UNEARNED PHOTO. REVENUE —-— — J. J. WILEY, CAPITAL A E Explanation .Z—Il --—- - — 1‘ — Ref EDIE—II —- Account No. 50 Chapter 2 - The Recording Process Page 23 c) Prepare a trial balance for Wiley Photography Studios at January 31. (1) Prepare an income statement for the month of January. Wiley Photography Studios Income Statement For the Month Ended January 31, 2009 Revenues — — ._ - ' oo o _ _ -_ -- ———__ — — — — Page 24 Chapter 2 — The Recording Process 6) Prepare an owner’s equity statement for the month of January. Wiley Photography Studios Owner’s Equity Statement For the Month Ended J anu 31, 2009 J.J.Wile CaitalJanu 1 . v Add: Investments > 1) Prepare a balance sheet at January 31. Wiley Photography Studios Balance Sheet January 31, 2009 Total assets Liabilities and Owner’s Equity Liabilities . r ‘ I ‘- I /0 on 0 F W 'o ’- / 900 MW ’ ,’~ - ‘. _- Total Liabilities —.' 1 ob Owner's equity ‘ ‘ _ — 2 m -J J .J . Wiley, Capital Total liabilities and owner's equity Chapter 2 — The Recording Process I Page 25 2-6 Preparing a trial balance. On April 30, 2009, the ledger for Spillman House Cleaning Service consisted of the following accounts: 8 Cleaning revenue ' Re’oenfie' $5,000 CA" H Cleaning equipment ' 9‘55" 5,000 Dr‘ 3 Accounts receivable" 5’9“? 8,000 or 5‘ Accounts payabl - L‘WQ'L'J‘I 4,000 O r- : Cash — Assc 7,000 0" 7 L. Spillman, Capital — 94:- 15,000 04" 9 Salaries payable A‘WL‘H 1,000 0‘- 3 Cleaning supplies— A3“-T 2,000 or 0! Salaries expense - E‘V’epse 2,000 “or .9 Transportation expense - 6"? E "551,000 0 f‘ Prepare a trial balance with the accounts arranged in the proper financial statement order. Page 26 Chapter 2 — The Recording Process Nb Woooafim 3:33 33% Woman 8 @8903 N-m, ES" :5 m8; 0:353 c235 883 :5 FEE Qmsmmonoam 03sz 2885:: mama. E E mlafi E E i... .. . . - .1 «SE a orgmwsm mcoE 05mm? mm mb 8m? Ga 90 035mg Hm Em Wnooa Eugene: :5 95:5me Egg 3 358; a A+V S e Ga 035% m 5 Ronni. I Una Q: 5%» N :35 BBQ _||l OW ca 9% . . III}? 3:: Gum—— >35" 92.9.8 We: O2: 3.25 021:: 9:5} Maia E3055 9.8: HE’S—Q. 96:»— 3.25 N was" 5638 560:5 39.38 any: fig: Huh—8:8 . ubco 03—. >me Una—6&5 9.8: 9;: . ubce u Hazing». >mm£ 92.030 62.: Mai—:52: 5.25 H >33 62:58 9.8: 95—. “.25 232 wavy—a Eman b.3225 9.25 228 Emma—o .. 3.25 a 9.255 FEE—.8 >wm2 €2.38 Una: wan—SE E3258 Wicca 03—. 5mm» Una—.88 03a: 9:: :25 m 9:: >me Han—dawn 62.: 03: :25 9.3.3.2. $58 W?» H— ESS—5 Inn—.835 9.2:. dug—dag 388 my? .0 :25 a mag—m8 >39 ESQ—ma Una: mcuEEm :25 >825? 555:; A EMEsz 7:688 03;: >825; Hausa—o fi :25 q 0am: >39 Han—damn 6%: 9:: face 288 wag—Ea 522:5 E2538 9.3:: 558 ago-Em _ 3.5 3 f>nnc==a waging" >3»: 529.8 cow: “Wane—E: $325.20 fl 3.25 . 358w..qu W225." wag—Ea €2.38 033: 553 522:8 :.25 NH nun: >32 ESQ—mo 52.: 05:. Face >825; “$874.20 362 con—damn 9.2.: >895: wooaméc—a Pace we maxim“ $62.3 aux—5:8 Foam-8 Una: marina smegma ubcc 95—. >33. Una—dug 9.2.: 03.. Face 3 PEAS—Q. Unfit—Hm 03:2; .35? 7.2.9.8 Una: 992:8: Unwiuw 925 08: $53 fl Una—.38 9.8: 95.. Face 03qu N - 1:5 Wmooawnm 308mm 3% Nu 2-8 Accounting terms and concepts. Listed below are several accounting terms and concepts. Match the letter of each with the appropriate phrase which states its meaning. a. Posting g. Trial balance b. Ledger h. Compound entry 0. Credit i. Normal balance (1. Debit j. Double-entry system c. Journalizing k. Chart of accounts f. Account 1. Journal b o 1. A record of increases and decreases in specific asset, liability, or owner’s equity items. 2. An accounting record in which transactions are initially recorded in chronological order. 0 L . 3. An account balance on the side where an increase in the account is recorded. k a 4. A list of accounts and the account numbers that identify their location in the ledger. e ‘ 5. The entering of transaction data in the journal. L 6. The entire group of accounts maintained by a company. (1- 7. The procedure of transferring journal entries to the ledger accounts. cl . 8. The left side of an account. 0- 9. The right side of an account. %_._ 10. A list of accounts and their balances at a given time. h. 11. A journal entry that involves three or more accounts. :34— 12. A system that records in appropriate accounts the dual effect of each transaction. Page 28 Chapter 2 — The Recording Process ...
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This note was uploaded on 05/20/2008 for the course ACCOUNTING ACC102 taught by Professor Murphy during the Spring '07 term at Monroe CC.

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chapter_2_the_recording_process - THE RECORDING PROCESS...

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