It helps to prevent or locate errors because the debit and credit amounts for each entry can be
easily compared.
15.
The advantage of the last step in the posting process is to indicate that the item has been
posted.
16.
(a)
Cash
9,000
Owner’s Capital
9,000
(Invested cash in the business)
(b)
Prepaid Insurance
800
Cash
800
(Paid one-year insurance policy)
(c)
Supplies
2,000
Accounts Payable
2,000
(Purchased supplies on account)
(d)
Cash
7,500
Service Revenue7,500(Received cash for services performed)17.(a)The entire group of accounts maintained by a company, including all the asset, liability, and owner’s equity accounts, is referred to collectively as the ledger.(b)A chart of accounts is a list of accounts and the account numbers that identify their location in the ledger. The chart of accounts is important, particularly for a company that has a large number of accounts, because it helps organize the accounts and define the level of detail that a companydesires in its accounting system.
Questions Chapter 2 (Continued)
18.
A trial balance is a list of accounts and their balances at a given time. The primary purpose of a
trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also
facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing financial
statements.
19.
No, Victor is not correct. The proper sequence is as follows:
(b)
Business transaction occurs.
(c)
Information entered in the journal.
(a)
Debits and credits posted to the ledger.
(e)
Trial balance is prepared.
(d)
Financial statements are prepared.
20.
(a)
The trial balance would balance.
(b)
The trial balance would not balance.
21.
The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 2-1
(a)
Debit
Effect
(b)
Credit
Effect
(c)
Normal
Balance
1.
Accounts Payable
Decrease
Increase
Credit
2.
Advertising Expense
Increase
Decrease
Debit
3.
Service Revenue
Decrease
Increase
Credit
4.
Accounts Receivable
Increase
Decrease
Debit
5.
Owner’s Capital
Decrease
Increase
Credit
6.
Owner’s Drawings
Increase
Decrease
Debit
BRIEF EXERCISE 2-2
Account Debited
Account Credited
June
1
Cash
Owner’s Capital
2
Equipment
Accounts Payable
3
Rent Expense
Cash
12
Accounts Receivable
Service Revenue
BRIEF EXERCISE 2-3
June
1
Cash
5,000
Owner’s Capital
5,000
2
Equipment
2,400
Accounts Payable
2,400
3
Rent Expense
800
Cash
800
12
Accounts Receivable
300
Service Revenue
300
BRIEF EXERCISE 2-4
The basic steps in the recording process are:
1.
Analyze each transaction. In this step, business documents are examined to determine the
effects of the transaction on the accounts.
2.
Enter each transaction in a journal. This step is called journalizing and it results in making a
chronological record of the transactions.
3.
Transfer journal information to ledger accounts. This step is called posting. Posting makes it
possible to accumulate the effects of journalized transactions on individual accounts.
BRIEF EXERCISE 2-5
(a)Effect on Accounting Equation(b)Debit-Credit AnalysisAug.1
