c2 - CHAPTER 2 The Recording Process ANSWERS TO QUESTIONS 1 A T account has the following parts(a the title(b the left or debit side and(c the right or

c2 - CHAPTER 2 The Recording Process ANSWERS TO QUESTIONS 1...

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2-1 CHAPTER 2 The Recording Process ANSWERS TO QUESTIONS 1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side. 2. Disagree. The terms debit and credit mean left and right respectively. 3. John is incorrect. The double-entry system merely records the dual effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect. 4. Kathy is incorrect. A debit balance only means that debits amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable. 5. (a) Asset accounts are increased by debits and decreased by credits. (b) Liability accounts are decreased by debits and increased by credits. (c) Revenues and owner’s capital are increased by credit and decreased by debits. Expenses and owner’s drawing are increased by debits and decreased by credits. 6. (a) Accounts Receivable—debits balance. (b) Cash—debits balance. (c) Owner’s Drawing—debit balance. (d) Accounts Payable—credit balance. (e) Service Revenue—credit balance. (f) Salaries Expense—debit balance. (g) Owner’s Capital—credit balance. 7. (a) Accounts Receivable—asset—debit balance. (b) Accounts Payable—liability—credit balance (c) Equipment—asset—debit balance. (d) Owner’s Drawing—owner’s equity—debit balance. (e) Supplies—asset—debit balance. 8. (a) Debit Supplies and credit Accounts Payable. (b) Debit Cash and credit Notes Payable. (c) Debit Salaries Expense and credit Cash. 9. (1) Cash—both debit and credit entries. (2) Accounts Receivable—both debit and credit entries. (3) Owner’s Drawing—debit entries only. (4) Accounts Payable—both debit and credit entries. (5) Salaries Expense—debits entries only. (6) Service Revenue—credit entries only. 10. The basic steps in the recording process are: (1) Analyze each transaction for its effect on the accounts. (2) Enter the transaction information in a journal (book of original entry).
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(3) Transfer the journal information to the appropriate accounts in the ledger (book of accounts). 11. The advantages of using the journal in the recording process 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 readily compared. 12. (a) The debit should be entered first. (b) The credit should be indented. 13. When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account.
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  • Spring '10
  • DennisB.
  • Accounting, ........., Double-entry bookkeeping system, Prepaid Insurance

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