Chapter 2, Problem 3BP

1.

To determine

Prepare journal entries to record the given transaction.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Prepare journal entries to record the given transaction of Company Z as follows:

Journal
Date	Account Title and Explanation	Post	Debit	Credit
		Ref.	($)	($)
November  1	Cash	101	30,000
	Office Equipment	163	15,000
	Common Stock	307		45,000
	(To record the amount invested on equipment in exchange of stock.)
November  2	Prepaid Rent	131	4,500
	Cash	101		4,500
	(To record the rent paid in advance)
November  4	Office Equipment	163	2,500
	Office Supplies	124	600
	Accounts Payable	201		3,100
	(To record the Purchase of equipment & supplies on credit.)
November  8	Cash	101	3,400
	Services Revenue	403		3,400
	(To record receipt of cash for the service performed)
November  12	Accounts Receivable	106	10,200
	Services Revenue	403		10,200
	(To record the service performed on account)
November  13	Accounts Payable	201	3,100
	Cash	101		3,100
	(To record the payment made for the balance due on account)
November  19	Prepaid Insurance	128	1,800
	Cash	101		1,800
	(To record Payment of premium for insurance)
November  22	Cash	101	5,200
	Accounts Receivable	106		5,200
	(To record the cash received on account)
November  24	Accounts Receivable	106	1,750
	Services Revenue	403		1,750
	(To record the service performed on account.)
November  28	Dividends	319	5,300
	Cash	101		5,300
	(To record the payment of cash  dividends)
November  29	Office Supplies	124	249
	Accounts Payable	201		249
	(To record the purchase of supplies on account)
November  30	Utilities Expense	690	831
	Cash	101		831
	(To record the utility bill incurred)

Table (1)

2.

To determine

Post the journal entries from Part 1 to their respective ledger accounts.

Explanation of Solution

Posting transactions:

The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Cash			Account. No. 101
Date	PR	Debit	Credit	Balance
November  1	G1	30,000		30,000
2	G1		4,500	25,500
8	G1	3,400		28,900
13	G1		3,100	25,800
19	G1		1,800	24,000
22	G1	5,200		29,200
28	G1		5,300	23,900
30	G1		831	23,069

Accounts Receivable			Account. No. 106
Date	PR	Debit	Credit	Balance
November  12	G1	10,200		10,200
22	G1		5,200	5,000
24	G1	1,750		6,750

Office Supplies			Account. No. 124
Date	PR	Debit	Credit	Balance
November  4	G1	600		600
29	G1	249		849

Prepaid Insurance			Account. No. 128
Date	PR	Debit	Credit	Balance
November  19	G1	1,800		1,800

Prepaid Rent			Account. No. 131
Date	PR	Debit	Credit	Balance
November  2	G1	4,500		4,500

Office Equipment			Account. No. 163
Date	PR	Debit	Credit	Balance
November  1	G1	15,000		15,000
4	G1	2,500		17,500

Accounts payable			Account. No. 201
Date	PR	Debit	Credit	Balance
November 4	G1		3,100	3,100
13	G1	3,100		0
29	G1		249	249

Common stock			Account. No. 307
Date	PR	Debit	Credit	Balance
November  1	G1		45,000	45,000

Dividends			Account. No. 319
Date	PR	Debit	Credit	Balance
November  28	G1	5,300		5,300

Service revenue			Account. No. 403
Date	PR	Debit	Credit	Balance
November  8	G1		3,400	3,400
12	G1		10,200	13,600
24	G1		1,750	15,350

Utilities expenses			Account. No. 690
Date	PR	Debit	Credit	Balance
November  30	G1	831		831

Table (2)

3.

To determine

Prepare a trial balance of Company Z as of November 30.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Company Z
Trial Balance
November  31
Particulars	Debit ($)	Credit ($)
Cash	$23,069
Accounts receivable	6,750
Office supplies	849
Prepaid insurance	1,800
Prepaid rent	4,500
Office equipment	17,500
Accounts payable		$249
Common stock		45,000
Dividends	5,300
Services revenue		15,350
Utilities expense	831
Totals	$60,599	$60,599

Table (3)