Concept explainers
1.
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting rules for Journal entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.
To Record: Each transaction of S Car Cleaning for the month of June.
1.
Explanation of Solution
Journalize the transactions of S Car Cleaning for the month of June.
Date | Account Title and Explanation | Debit($) | Credit($) |
June 1 | Cash | 70,000 | |
Notes Payable | 70,000 | ||
(To record obtain of loan from the bank.) | |||
June 2 | Cash | 40,000 | |
Common Stock | 40,000 | ||
(To record common stock purchased for cash.) | |||
June 7 | Equipment | 75,000 | |
Cash | 75,000 | ||
(To record purchase of equipment.) | |||
June 10 | Supplies | 8,000 | |
Accounts Payable | 8,000 | ||
(To record purchase of supplies on account) | |||
June 12 | Cash | 5,000 | |
Service revenue | 5,000 | ||
(To record the payment received for the altered dresses.) | |||
June 16 | Salary Expense | 900 | |
Cash | 900 | ||
(To record the salary payment made.) | |||
June 19 | Advertising Expense | 500 | |
Cash | 500 | ||
(To record the advertising payment made) | |||
June 23 | Accounts receivable | 6,000 | |
Service Revenue | 6,000 | ||
(To record receipt of payment for car washes were due ion account.) | |||
June 29 | Salaries Expense | 950 | |
Cash | 950 | ||
(To record salary expense payment) | |||
June 30 | Utilities Expense | 1,400 | |
Cash | 1,400 | ||
(To record utility expense payment.) | |||
June 30 | Dividends | 600 | |
Cash | 600 | ||
(To record the payment of Dividends made to the stockholders.) |
Table (1)
2. and 3.
T-account:
An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:
- The title of the account
- The left or debit side
- The right or credit side
To Calculate: The balance of each account by posting each transaction to the T-accounts.
2. and 3.
Explanation of Solution
Cash Account
Cash | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 1 | Notes payable | 70,000 | June 7 | Equipment | 75,000 | |
June 2 | Common stock | 40,000 | June 16 | Salaries expense | 900 | |
June 12 | Service Revenue | 5,000 | June 19 | Advertising expense | 500 | |
June 29 | Salaries expense | 950 | ||||
June 30 | Utilities expense | 1,400 | ||||
June 30 | Dividends | 600 | ||||
June 30 | Balance c/d | 35,650 | ||||
115,000 | 115,000 | |||||
July 1 | Balance b/d | 35,650 |
Table (2)
Common Stock Account
Common Stock | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Balance c/d | 40,000 | June 2 | Cash | 40,000 | |
Total | 40,000 | Total | 40,000 | |||
July 1 | Balance b/d | 40,000 |
Table (3)
Accounts Receivable Account
Accounts Receivable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 23 | Service Revenue | 6,000 | June 30 | Balance c/d | 6,000 | |
Total | 6,000 | Total | 6,000 | |||
July 1 | Balance b/d | 6,000 |
Table (4)
Equipment Account
Equipment | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 7 | Cash | 75,000 | March 31 | Balance c/d | 75,000 | |
Total | 75,000 | Total | 75,000 | |||
July 1 | Balance b/d | 75,000 |
Table (5)
Supplies Account
Supplies | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 10 | Accounts payable | 8,000 | June 30 | Balance c/d | 8,000 | |
Total | 8,000 | Total | 8,000 | |||
July 1 | Balance b/d | 8,000 |
Table (6)
Accounts Payable Account
Accounts Payable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Balance c/d | 8,000 | June 10 | Supplies | 8,000 | |
Total | 8,000 | Total | 8,000 | |||
July 1 | Balance b/d | 8,000 |
Table (7)
Service Revenue Account
Service Revenue | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Balance c/d | 11,000 | June 12 | Cash | 5,000 | |
June 23 | Accounts Receivable | 6,000 | ||||
Total | 11,000 | Total | 11,000 | |||
July 1 | Balance b/d | 11,000 |
Table (8)
Notes Payable Account
Notes Payable | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Balance c/d | 2,700 | June 7 | Equipment | 2,700 | |
Total | 2,700 | Total | 2,700 | |||
July 1 | Balance b/d | 2,700 |
Table (9)
Salary Expense Account
Salary Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 16 | Cash | 900 | June 30 | Balance c/d | 1,850 | |
June 29 | Cash | 950 | ||||
Total | 1,850 | Total | 1,850 | |||
July 1 | Balance b/d | 1,850 |
Table (10)
Advertising Expense Account
Advertising Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 19 | Cash | 500 | June 30 | Balance c/d | 500 | |
Total | 500 | Total | 500 | |||
Balance b/d | 500 |
Table (11)
Utility Expense Account
Utility Expense | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Cash | 1,400 | June 30 | Balance c/d | 1,400 | |
Total | 1,400 | Total | 1,400 | |||
July 1 | Balance b/d | 1,400 |
Table (12)
Dividends Account
Dividends | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
June 30 | Cash | 600 | June 30 | Balance c/d | 600 | |
Total | 600 | Total | 600 | |||
July 1 | Balance b/d | 600 |
Table (13)
4.
A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.
To Prepare: A trial balance as of June.
4.
Explanation of Solution
Prepare the trial balance of S Car Cleaning for the month of June.
S Car Cleaning Trial Balance June 30 | ||
Account Titles | Debit ($) | Credit ($) |
Cash | 33,650 | |
Accounts receivable | 6,000 | |
Supplies | 8,000 | |
Equipment | 75,000 | |
Accounts payable | 8,000 | |
Notes payable | 70,000 | |
Common stock | 40,000 | |
Dividends | 600 | |
Service revenue | 11,000 | |
Salaries expense | 1,850 | |
Advertising expense | 500 | |
Utilities expense | 1,400 | |
Total | 129,000 | 129,000 |
Table (14)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $129,000.
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Chapter 2 Solutions
Financial Accounting
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