Glossary of Terms

Chapter 2

Account A record of increases and decreases in specific asset, liability, or owner’s equity items. (p-52)

Chart of accounts A list of accounts and that account numbers that identify their location in the ledger. (p-63)

Compound entry A journal entry that involves three or more accounts. (p-59)

Credit The right side of an account. (p-52)

Debit The left side of an account. (p-52)

Double-entry system A system that records in appropriate accounts the dual effect of each transaction. (p-53)

General journal The most basic form of journal. (p-58)

General ledger A ledger that contains all asset, liability, and owner’s equity accounts. (p-60)

Journal An accounting record in which transactions are initially recorded in chronological order. (p-58)

Journalizing The entering of transaction data in the journal. P-58)

Ledger The entire group of accounts maintained by a company. (p-60)

Normal balance An account balance on the side where an increase in the account is recorded. (p-54)

Posting The procedure of transferring journal entries to the ledger accounts. (p-61)

Simple entry A journal entry that involves only two accounts. (p-59)

T account The basic form of an account. (p-52)

Three-column form of account A form with columns for debit, credit, and balance amounts in an account. (p-61)

Trial balance A list of accounts and their balances at a given time. (p-70)

Self-Test Questions

Chapter 2

1. Which of the following statements about an account is true?a. In its simplest form, an account consists of two parts.b. An account is an individual accounting record of increases and decreases in specific asset, liability, and

owner’s equity items.c. There are separate accounts for specific assets and liabilities but only one account for owner’s equity items.d. The left side of an account is the credit or decrease side.

2. Debits:a. Increase both assets and liabilitiesb. Decrease both assets and liabilities.c. Increase assets and decrease liabilities.d. Decrease assets and increase liabilities.

3. A revenue account:a. Is increased by debits.b. Is decreased by credits.c. Has a normal balance of a debit.d. Is increased by credits.

4. Accounts that normally have debit balances are:a. Assets, expenses, and revenues.b. Assets, expenses, and owner’s capital.c. Assets, liabilities, and owner’s drawings.d. Assets, owner’s drawings, and expenses.

5. The expanded accounting equation is:a. Assets + Liabilities = Owner’s Capital + Owner’s Drawings _ Revenue + Expensesb. Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues – Expensesc. Assets = Liabilities – Owner’s Capital – Owner’s Drawings – Revenues – Expensesd. Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses

6. Which of the following is not part of the recording process?a. Analyzing transactionsb. Preparing a trial balance.c. Entering transactions in a journal.d. Posting transactions.

7. Which of the following statements about a journal is false?a. It is not a book of original entry.b. It provides a chronological record of transactions.c. It helps to locate errors because the debit and credit amounts for each entry can be readily compared.d. It discloses in one place the complete effect of a transaction.

8. The purpose of supplies on account should result in:a. A debit to Supplies Expense and a credit to Cash.b. A debit to Supplies Expense and a credit to Accounts Payable.

c. A debit to Supplies and a credit to Accounts Payable.d. A debit to Supplies and a credit to Accounts Receivable.

9. The order of the accounts in the ledger is:a. assets, revenues, expenses, liabilities, owner’s capital, owner’s drawings.b. assets, liabilities, owner’s capital, owner’s drawings, revenues, expenses.c. owner’s capital, assets. revenues, expenses, liabilities, owner’s drawings.d. revenues, assets, expenses, liabilities, owner’s capital, owner’s drawings.

10. A ledger:a. contains only asset and liability accounts.b. should show accounts in alphabetical order.c. is a collection of the entire group of accounts maintained by a company.d. is a book of original entry.

11. Posting:a. normally occurs before journalizing.b. transfer ledger transaction data to the journal.c. is an optional step in the recording process.d. transfer journal entries to ledger accounts.

12. Before posting a payment of $5,000, the Accounts Payable of Senator Company had a normal balance of $16,000. The balance after posting the transaction was:

a. $21,000b. $5,000c. $11,000d. Cannot be determined.

13. A trial balance:a. is a list of accounts with their balances at a given time.b. proves the mathematical accuracy of journalized transactions.c. will not balance if a correct journal entry is posted twice.d. proves that all transactions have been recorded.

14. A trial balance will not balance if:a. a correct journal entry is posted twice.b. the purchase of supplies on account is debited to Supplies and credited to Cash.c. a $100 cash drawing by the owner is debited to Owner’s Drawings for $1,000 and credited to Cash for $100.d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

15. The trial balance of Clooney Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner’s Capital $42,000, Owner’s Drawings $15,000, Equipment $61,000. In preparing a trial balance, the total in the debit column is:

a. $131,000b. $216,000c. $91,000d. $116,000.

IFRS1. Which statement is correct regarding IFRS?a. IFRS reverses the rules of debits and credits, that is, debits are on the right and credits on the left.b. IFRS uses the same process for recording transactions as GAAP.c. The chart of accounts under IFRS is different because revenues follow assets.d. None of the above statements are correct.

IFRS2. The expanded accounting equation under IFRS is as follows:a. Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues – Expensesb. Assets + Liabilities = Owner’s Capital + Owner’s Drawings + Revenues – Expensesc. Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expensesd. Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenues – Expenses

IFRS3. A trial balance:a. Is the same under IFRS and GAAP.b. Proves that transactions are recorded correctly.c. Proves that all transactions have been recorded.d. Will not balance if a correct journal entry is posted twice.

IFRS4. One difference between IFRS and GAAP is that:a. GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basic of accounting.b. IFRS uses a different posting process than GAAPc. IFRS uses more fair value measurements than GAAP.d. The limitations of a trial balance are different between IFRS and GAAP.

IFRS5. The general policy for using proper currency signs (dollar, yen, pound, etc.) is the same for both IFRS and this textbook. The policy is as follows:a. Currency signs only appear in ledgers and journal entries.b. Currency signs are only shown in the trial balance.c. Currency signs are shown for all compound journal entries.d. Currency signs are shown in trial balances and financial statements.

Self-Test Questions from Website

S-T1. The left side of an accounta. Is always the balance sideb. May represent the debit side or the credit sidec. Is always the debit sided. Is always the credit side

S-T2. Accounts that normally have debit balances area. assets, expenses, and revenuesb. assets, expenses, and owner's capital.c. assets, liabilities, and owner's drawings.d. assets, owner's drawings, and expenses.

Correct! Assets, owner's drawings, and expenses all have normal debit balancesS-T3. Which of the following is not part of the recording process?

a. analyzing transactionsb. preparing a trial balance.c. entering transactions in a journal.d. posting transactions.

Correct! Preparing the trial balance is not part of the recording process.S-T4. On October 3, Nick Carter, a carpenter, received a cash payment for services previously billed to a client. Nick

paid his telephone bill and bought equipment on credit. For the three transactions, at least one of the entries will include aa. credit to Nick Carter, Capital.

b. credit to Notes Payable.c. debit to Accounts Payable.d. credit to Accounts Payable.

Correct! The purchase of equipment on credit involves a debit to Equipment and a credit to Accounts Payable.

S-T5. Management could determine the amounts due from customers by examining which ledger account?a. Service Revenueb. Accounts Payablec. Accounts Receivabled. SuppliesCorrect! Amounts due from customers can be obtained by examining the Accounts Receivable ledger account.

S-T6. Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction wasa. $21,000.b. $5,000.c. $11,000.d. cannot be determined.Correct! The balance is $11,000 = $16,000 (normal balance) - $5,000 (payment).

S-T7. A trial balance would only help in detecting which one of the following errors?a. A transaction that is not journalized.b. A journal entry that is posted twice.c. Offsetting errors made in recording the transaction.d. A transposition error when transferring the debit side of the journal entry to the ledger.Correct! A trial balance will not detect entries not journalized, entries posted twice, or any offsetting errors made in recording transactions.

S-T8. Which of the following statements about an account is true?a. In its simplest form, an account consists of two parts.b. An account is an individual accounting record of increases and decreases in specific asset, liability, and

owner's equity items.c. There are separate accounts for specific assets and liabilities but only one account for owner's equity items.d. The left side of an account is the credit or decrease side.

Correct! This is a true statement about an account.S-T9. A credit to a liability account indicates a(n)

a. debit was made to an asset account.b. decrease in the liability.c. increase in the liability.d. error.

Correct! A credit to a liability account indicates an increase in the liability ("Assets and Liabilities").S-T10. The second step in the recording process is

a. preparing a trial balance.b. analyzing a transaction.c. posting to the general ledger.d. journalizing a transaction.

Correct! The second step in the recording process is entering a transaction in a journal.S-T11. Entering transaction data in the journal is known as

a. posting.

b. journalizing.c. balancing.d. recording.

Correct! Entering transaction data in the journal is known as journalizing ("Journalizing").S-T12. The order of the accounts in the ledger is

a. assets, revenues, expenses, liabilities, owner's capital, owner's drawing.b. assets, liabilities, owner's capital, owner's drawing, revenues, expenses.c. owner's capital, assets, revenues, expenses, liabilities, owner's drawing.d. revenues, assets, expenses, liabilities, owner's capital, owner's drawing.

Correct! The correct order of the accounts in the ledger is: assets, liabilities, owner's capital, owner's drawing, revenues, expenses.

S-T13. The purchase of supplies on account should result in:a. a debit to Supplies Expense and a credit to Cash.b. a debit to Supplies Expense and a credit to Accounts Payable.c. a debit to Supplies and a credit to Accounts Payable.d. a debit to Supplies and a credit to Accounts Receivable.

Correct! The purchase of supplies on account results in a debit to Supplies and credit to Accounts Payable.S-T14. The trial balance of Kelso Company had accounts with the following normal balances: Cash, $8,000; Accounts

Receivable, $6,000; Equipment, $10,000; Accounts Payable, $9,000; Owner's Capital, $15,000; Owner's Drawing, $500; Service Revenue, $7,000; Rent Expense, $1,000; Salaries and Wages Expense, $3,000; and Advertising Expense, $2,500. In preparing the trial balance, the total in the debit column isa. $40,000.b. $31,000.c. $31,500.d. $39,000.

Correct! Cash ($8,000) + Accounts Receivable ($6,000) + Equipment ($10,000) + Owner's Drawing ($500) + Rent Expense ($1,000) + Salaries and Wages Expense ($3,000) + Advertising Expense ($2,500) ("The Trial Balance").

Summary of Study Objectives

Chapter 2

1. Explain what an account is and how it helps in the recording process.An account is a record of increases and decreases in specific asset, liability, and owner’s equity items.

2. Define debits and credits and explain their use in recording business transactions.The terms debit and credit are synonymous with left and right. Assets, drawings, and expenses are increased by debits and decreased by credits. Liabilities owner’s capital, and revenues are increased by credits and decreased by debits.

3. Identify the basic steps in the recording process.The basic steps in the recording process are:

(a) analyze each transaction for its effects on the accounts.(b) enter the transaction information in a journal,(c) transfer the journal information to the appropriate accounts in the ledger.

4. Explain what a journal is and how it helps in the recording process.The initial accounting record of a transaction is entered in a journal before the data are entered in the accounts. A journal:

(a) discloses in one place the complete effects of a transaction,(b) provides a chronological record of transactions, and(c) prevents or locates errors because the debit and credit amounts for each entry can be easily compared.

5. Explain what a ledger is and how it helps in the recording process.The ledger is the entire group of accounts maintained by a company. The ledger keeps in one place all the information about changes in specific account balances.

6. Explain what posting is and how it helps in the recording process.Posting is the transfer of journal entries to the ledger accounts. this phase of the recording process accumulates the effects of journalized transactions in the individual accounts.

7. Prepare a trial balance and explain its purposes.A trial balance is a list of accounts and their balances at a given time. Its primary purpose is to prove the equality of debits and credits after posting. A trial balance also uncovers errors in journalizing and posting and is useful in preparing financial statements.

Questions (Page 78)

Chapter 2

1. Describe the parts of a T account.a. A T account consists of two sides- debits on the left and credits on the right.

2. “The terms debit and credit mean increase and decrease, respectively.” Do you agree? Explain.a. No. A debit/credit can be an increase/decrease depending on what account they are in. The terms debit and

credit mean left and right respectively.3. Jeff Hiller, a fellow student, contends that the double-entry system means each transaction must be recorded

twice. Is Jeff correct? Explain.a. No, a transaction should not be recorded twice. The double-entry system relates back to the basic

accounting equation, that both sides must balance.4. Maria Alvarez, a beginning accounting student, believes debit balances are favorable and credit balances are

unfavorable. Is Maria correct? Discuss.a. No. Depends on account. See #2.

5. State the rules of debit and credit as applied to (a) asset accounts, (b) liability accounts, and (c) the owner’s equity accounts (revenue, expenses, owner’s drawings, and owner’s capital).

a. Increases are debits, decreases are creditsb. Increases are credits, decreases are debitsc. Revenue- Increases are credits, decreases are debits.

Expenses- Increases are debits, decreases are credits.Owner’s Drawings- Increases are debits, decreases are credits.Owner’s Capital- Increases are credits, decreases are debits.

6. What is the normal balance for each of the following accounts?a. Accounts Receivable

Debit Balanceb. Cash

Debit Balancec. Owner’s Drawings

Debit Balanced. Accounts Payable

Credit Balancee. Service Revenue

Credit Balancef. Salaries and Wages Expense

Debit Balanceg. Owner’s Capital

Credit Balance7. Indicate whether each of the following accounts is an asset, a liability, or an owner’s equity account and whether

it has a normal debit or credit balancea. Accounts Receivable:

Asset, Normal Debit

b. Accounts PayableLiability, Normal Credit

c. EquipmentAsset, Normal Debit

d. Owner’s DrawingsOE, Normal Debit

e. SuppliesAsset, Normal Debit

8. For the following transactions, indicate the account debited and the account credited.a. Supplies are purchased on account.

Supplies expenses debited, accounts payable creditedb. Cash is received on signing a note payable.

Cash debited, Notes Payable creditedc. Employees are paid salaries in cash.

Employees and Wages Expense debited, Cash credited.9. Indicate whether the following accounts generally will have (a) debit entries only, (b) credit entries only, or (c)

both debit and credit entriesa. Cash:

cb. Accounts Receivable:

cc. Owner’s Drawings:

ad. Accounts Payable:

ce. Salaries and Wages Expense:

af. Service Revenue:

b10. What are the basic steps in the recording process?

1) Analyze transactions, 2) Enter into journal, 3) Transfer journal to ledger. 11. What are the advantages of using a journal in the recording process?

It discloses in one place the complete effects of a transaction.It provides a chronological record of all transactions.It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.

12. (a) When entering a transaction in the journal, should the debit or credit be written first? (b) Which should be indented, the debit or credit?The debit should be entered first. The credit should be indented.

13. Describe a compound entry, and provide an example.An entry where debits/credits are increased/decreased from more than 2 accounts.

14. (a) Should business transaction debits and credits be recorded directly in the ledger accounts? (b) What are the advantages of first recording transactions in the journal and then posting to the ledger?No. The advantages are 1) it discloses in one place the complete effects of a transaction2) 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 easily compared.

15. The account number is entered as the last step in posting the amounts from the journal to the ledger. What is the advantage of this step?The advantage is to indicate that the item has been posted.

16. Journalize the following business transactions.a. Hector Molina invests $9,000 cash in the business.

b. Insurance of $800 is paid for the year.

c. Supplies of $2,000 are purchased on account.

d. Cash of $7,500 is received for services rendered.

17. (a) What is a ledger? (b) What is a chart of accounts and why is it important?A ledger is the entire group of accounts maintained by a company. A chart of accounts is a list of accounts and that account numbers that identify their location in the ledger. It helps organize the accounts and define the level of detail that a company desires in its accounting system.

18. What is a trial balance and what are its purposes?A trial balance is a list of accounts and their balances at a given time. The primary purpose of a trial balance is to check that the debits equal the credits after posting.

19. Jim Benes is confused about how accounting information flows through the accounting system. He believes the flow of information is as follows. Is Jim correct? If not, indicate to Jim the proper flow of the information. (a) Debits and credits posted to the ledger (b) Business transaction occurs (c) Information entered in the journal (d) Financial statements prepared (e) Trial balance is prepared.No- b, c, a, e, d

20. Two students are discussing the use of a trial balance. They wonder whether the following errors, each considered separately, would prevent the trial balance from balancing. (a) The bookkeeper debited Cash for $600 and credited Salaries and Wages Expense for $600 for payment of wages. (b) Cash collected on account was debited to Cash for $900 and Service Revenue was credited for $90. What would you tell them?a- Would balanceb- Would NOT balance

21. What are the normal balances for PepsiCo’s Cash, Accounts Payable, and Interest Expense accounts?The normal balances are Cash debit, Accounts Payable credit, and Interest Expense debit.

Brief Exercises

Chapter 2

BE2-1 For each of the following accounts, indicate the effects of (a) a debit and (b) a credit on the accounts and (c) the normal balance of the account

1. Accounts PayableA debit decreases Accounts Payable. (b) A credit Increases Accounts Payable. (c) Normal Credit.

2. Advertising ExpenseA debit increases Advertising Expense. (b) A credit decreases Advertising Expense. (c) Normal Debit.

3. Service RevenueA debit decreases Service Revenue. (b) A credit Increases Service Revenue. (c) Normal Credit.

4. Accounts ReceivableA debit increases Accounts Receivable. (b) A credit decreases Accounts Receivable. (c) Normal Debit.

5. Owner’s CapitalA debit decreases Owner’s Capital. (b) A credit Increases Owner’s Capital. (c) Normal Credit

6. Owner’s DrawingsA debit increases Owner’s Drawings. (b) A credit decreases Owner’s Drawings. (c) Normal Debit.

BE2-2 Transactions for the Daniel Hudson Company for the month of June are presented below. Identify the accounts to be debited and credited for each transaction.June 1 Dan Hudson invests $5,000 cash in a small welding business of which he is the sole proprietor.2 Purchases equipment on account for $2,100.3 $800 cash is paid to landlord for June rent.12 Bills O. Guillen $300 for welding work done on account.

Debit CreditCash $5,000

Owner’s Capital $5,000Equipment Expense 2,100

Accounts Payable 2,100Rent Expense 800

Cash 800Accounts Receivable 300

Service Revenue 300BE2-3 Using the data in BE2-2, journalize the transactions. (You may omit explanations.)

See aboveBE2-4 Kenny Williams a fellow student, is unclear about the basic steps in the recording process. Identify and briefly

explain the steps in the order in which they occur.1) Analyze transactions2) Record transactions in journal3) Transfer journal to ledger (posting)

BE2-5 J. Reinsdorf has the following transactions during August of the current year. Indicate (a) the effect on the accounting equation and (b) the debit-credit analysis illustrated on pages 64-68 of the text.Aug 1 Opens an office as a financial advisor, investing $8,000 in cash.

Credits increase Owner’s Equity, credit Owner’s Equity $8,000.Debits increase Assets, debit assets $8,000.4 Pays insurance in advance for 6 months, $1,800 cash.Debits increase prepaid Insurance, increase Prepaid Insurance $1,800.Credits decrease Cash, decrease cash $1,800.16 Receives $3,400 from clients for services provided.Debits increase Cash, debit Cash $3,400.Credits increase Service Revenue, credit Service Revenue $3,400.27 Pays secretary $1,000 salary.Debits increase Wage Expenses, debit Wage Expenses $1,000.Credits decrease Cash, decrease Cash $1,000.

BE2-6 Using the data in BE2-5, journalize the transactions. (You may omit explanations.)

GENERAL JOURNALDate Account Titles and Explanation Ref Debit Credit

2012Aug 1 Cash $8,000

Owner’s Capital $8,000Aug 4 Prepaid Insurance 1,800

Cash 1,800 Aug 16 Cash 3,400

Service Revenue 3,400 Aug 27 Salary & Wages Expense 1,000

Cash 1,000

BE2-7 Selected transactions for the Anthony Adams Company are presented in journal form below. Post the transactions to T accounts. Make one T account for each item and determine each account’s ending balance.

Cash 101May 12 $2,400

15 3,000$5,400

Accounts Receivable 112May 5 $4,100 May 12 $2,400

$1,700

Service Revenue 400May 5 $4,100May 15 3,000

$7,100

BE2-8 Selected journal entries for the Anthony Adams Company are presented in BE2-7. Post the transactions using the standard form of account.

CASH 101Date Explanation Ref. Debit Credit Balance

May 12 $2,400 $2,40015 3,000 $5,400

Accounts Receivable 112Date Explanation Ref. Debit Credit Balance

May 5 $4,100 $4,10012 $2,400 $1,700

Service Revenue 400Date Explanation Ref. Debit Credit Balance

May 5 $4,100 $4,10015 3,000 $7,100

BE2-9 From the ledger balances given below, prepare a trial balance for the Afalava Company at June 40, 2012. List the accounts in the order shown on page 63 of the text. All account balances are normal. Accounts Payable $9,000, Cash $5,800, Owner’s Capital $15,000, Owner’s Drawings $1,200, Equipment $17,000, Service Revenue $10,000, Accounts Receivable $3,000, Salaries and Wages Expense $6,000, and Rent Expense $1,000.

COMPANY NAMETrial BalanceJune 30,2012

Debit CreditCash $5,800Accounts Receivable 3,000Equipment 17,000Accounts Payable $9,000Owner’s Capital 15,000Owner’s Drawings 1,200Service Revenue 10,000Salaries and Wages Expense 6,000Rent Expense 1,000

34,000 34,000

BE2-10 An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance, assuming all account balances are normal.

WALTER COMPANYTrial Balance

31-Dec-12Debit Credit

Cash $10,800Prepaid Insurance 3,500Accounts Payable $3,000Unearned Service Revenue $2,200Owner’s Capital 9,000Owner’s Drawings 4,500Service Revenue 25,600Salaries and Wages Expense 18,600Rent Expense 2,400

$39,800 $39,800

Brief Exercises

Chapter 2

E2-1. Johan Aslata has prepared the following list of statements about accounts. Identify each statement as true or false. If false, indicate how to correct the statement.1. An account is an accounting record of either a specific asset or a specific liability.

False. An account is an accounting record of a specific asset, liability, or owner’s equity item.2. An account shows only increases, not decreases, in the item it relates to.

False. An account shows increases and decreases in the item it relates to.3. Some items, such as Cash and Accounts Receivable, are combined into one account.

False. Each asset, liability, and owner’s equity item has a separate account.4. An account has a left, or credit side, and a right, or debit side.

False. An account has a left, or debit side, and a right, or credit side.5. A simple form of an account consisting of just the account title, the left side, and the right side, is called a

T-account.True.

E2-2. Selected transactions for M. Anderson, an interior decorator, in her first month of business, are as follows. For each transaction, indicate the following.(a) The basic type of account debited and credited (asset, liability, owner’s equity)(b) The specific account debited and credited (cash, rent expense, service revenue, etc.)(c) Whether the specific account is increased or decreased.(d) The normal balance of the specific account.

Account Debited Account Credited

Date (a) Basic Type

(b) Specific Account

(c)Effect

(d) Normal Balance

(a) Basic Type

(b) Specific Account

(c)Effect

(d) Normal Balance

Jan. 2 Asset Cash Increase Debit OE Owner Cap Increase Credit

3 Asset Equipment Increase Debit Asset Cash Decrease Debit

9 Asset Supplies Increase Debit Liability Acct. Pay Increase Credit

11 Asset Acct. Rec. Increase Debit OE Revenue Increase Credit

16 OE Expenses Increase Debit Asset Cash Decrease Debit

20 Asset Cash Increase Debit Asset Acct. Rec. Decrease Debit

23 Liability Acct. Pay Decrease Credit Asset Cash Decrease Debit

28 OE Owner Dr. Increase Debit Asset Cash Decrease Debit

E2-3. Data for M. Anderson, interior decorator, are presented in E2-2. Journalize the transactions using journal page J1. (You may omit explanations.)

GENERAL JOURNALDate Account Titles and Explanation Ref Debit Credit

Jan. 2 Cash J1 $ 10,000Owner's Capital J1 $ 10,000

3 Equipment J1 4,000Cash J1 4,000

9 Supplies J1 500Accounts Payable J1 500

11 Accounts Receivable J1 2,100Service Revenue J1 2,100

16 Advertising Expense J1 350Cash J1 350

20 Cash J1 700Accounts Receivable J1 700

23 Accounts Payable J1 300Cash J1 300

28 Owner’s Drawings J1 1,000Cash J1 1,000

E2-6. Barnes Industries had the following transactions.

(a) Indicate what accounts are increased and decreased by each transaction.(b) Journalize each transaction. (Omit explanations.)

1. Borrowed $5,000 from the bank by signing a note.Notes Payable INCREASED (credited), Cash INCREASED (debited)

2. Paid $3,100 cash for a computer.Equipment INCREASED (debited), Cash DECREASED (credited)

3. Purchased $850 of supplies on account.Supplies INCREASED (debited), Accounts Payable INCREASED (credited)

Cash $ 5,000Notes Payable $ 5,000

Equipment 3,100Cash 3,100

Supplies 850Accounts Payable 850

E2-7. Beekman Industries had the following selected transactions.(a) Indicate the effect each transaction has on the accounting equation(Assets = Liabilities + Owner’s Equity), using plus and minus signs.(b) Journalize each transaction. (Omit explanations.)1. Jo Beekman invested $4,000 cash in the business.

Increased Assets, Increased OE2. Paid office rent of $950.

Decreased Assets (Cash), Decreased OE (Expenses)

3. Performed consulting services and billed a client $5,200.Increased Assets (Accounts Receivable), Increased OE (Service Revenue)

4. Jo Beekman withdrew $750 cash for personal use.Decreased Assets (Cash), Decreased OE (Owner’s Drawings)

Cash $ 4,000Owner's Capital $ 4,000

Rent Expense 950Cash 950

Accounts Receivable 5,200Service Revenue 5,200

Owner's Drawings 750Cash 750

E2-14. The accounts in the ledger of Bullucks Delivery Service contain the following balances on July 31, 2012. Prepare a trial balance with the accounts arranged as illustrated in the chapter and fill in the missing amount for Cash.

Accounts Receivable $ 7,642 Prepaid Insurance $ 1,968Accounts Payable 8,396 Maintenance and Repairs Expense 961Cash ? Service Revenue 10,610Equipment 49,360 Owner’s Drawings 700Gasoline Expense 758 Owner’s Capital 42,000Insurance Expense 523 Salaries and Wages Expense 4,428Notes Payable 17,000 Salaries and Wages Payable 815

Bullucks Delivery ServiceTrial Balance

31-Jul-12Debit Credit

Cash $ 12,481.00

Accounts Receivable 7,64

2

Prepaid Insurance 1,96

8Equipment 49,360

Notes Payable $ 17,000

Accounts Payable 8,396Salaries and Wages Payable 815Owner’s Capital 42,000Owner’s Drawings 700Service Revenue 10,610

Salaries and Wages Expense 4,42

8Maintenance and Repairs Expense 961Insurance Expense 523Gasoline Expense 758

78,821 78,821