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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)Cash9,000Owner’s Capital9,000(Invested cash in the business)(b)Prepaid Insurance800Cash800(Paid one-year insurance policy)(c)Supplies2,000Accounts Payable2,000(Purchased supplies on account)(d)Cash7,500
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 financialstatements.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.
BRIEF EXERCISE 2-3June1Cash5,000Owner’s Capital5,0002Equipment2,400Accounts Payable2,4003Rent Expense800Cash80012Accounts Receivable300Service Revenue300BRIEF EXERCISE 2-4The 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