Concept explainers
On October 1, 2019, Helen Kennedy opened an advertising agency. She plans to use the chart of accounts listed below.
INSTRUCTIONS
1. Journalize the transactions. Number the journal page 1, write the year at the top of the Date column, and include a description for each entry.
2. Post to the ledger accounts. Before you start the posting process, open accounts by entering account names and numbers in the headings. Follow the order of the accounts in the chart of accounts.
ASSETS
101 Cash
111
121 Supplies
141 Office Equipment
151 Art Equipment
LIABILITIES
202 Accounts Payable
OWNER’S EQUITY
301 Helen Kennedy, Capital
302 Helen Kennedy, Drawing
REVENUE
401 Fees Income
EXPENSES
511 Office Cleaning Expense
514 Rent Expense
517 Salaries Expense
520 Telephone Expense
523 Utilities Expense
Analyze: What is the balance of account 202 in the general ledger?
1.
Journalize 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.
Debit: A debit, is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.
Credit: A credit, is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
- Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.
Pass the journal entries for the given transactions:
General Journal | Page - 1 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
October 1 | Cash | 101 | $70,000 | |
HK Capital | 301 | $70,000 | ||
(To record the receipt of capital) | ||||
October 2 | Rent expense | 514 | $4,000 | |
Cash | 101 | $4,000 | ||
(To record the payment of rent, Check 1001) |
Table (1)
General Journal | Page - 2 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
October 5 | Office Equipment | 141 | $18,000 | |
Accounts payable | 202 | $18,000 | ||
(To record the purchase of office equipment on account Invoice 6704) | ||||
October 6 | Art Equipment | 151 | $4,100 | |
Cash | 101 | $4,100 | ||
(To record the purchase of art equipment for cash, Check 1002) | ||||
October 7 | Supplies | 121 | $1,670 | |
Cash | 101 | $1,670 | ||
(To record the purchase of supplies for cash, Check 1003) | ||||
October 10 | Office Cleaning Expense | 511 | $8,00 | |
Cash | 101 | $8,00 | ||
(To record the payment of office cleaning expense, Check 1004) | ||||
October 12 | Cash | 101 | $4,200 | |
Accounts receivable | 111 | $1,800 | ||
Fees Income | 401 | $6,000 | ||
(To record the services provided for cash and on account) | ||||
October 15 | Cash | 101 | $300 | |
Supplies | 121 | $300 | ||
(To record the return of damaged supplies for cash refund) | ||||
October 18 | Office Equipment | 141 | $3,000 | |
Cash | 101 | $1,750 | ||
Accounts payable | 202 | $1,250 | ||
(To record the services provided for cash and on account) |
Table (2)
General Journal | Page - 3 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
October 20 | Accounts payable | 202 | $9,500 | |
Cash | 101 | $9,500 | ||
(To record the payment for office supplies, Invoice 5103 by Check 206) | ||||
October 26 | Accounts receivable | 111 | $4,800 | |
Fees income | 401 | $4,800 | ||
(To record the service provided on account) | ||||
October 27 | Telephone expense | 520 | $375 | |
Cash | 101 | $375 | ||
(To record the payment of telephone bill, Check 1007) | ||||
October 30 | Cash | 101 | $4,200 | |
Accounts receivable | 111 | $4,200 | ||
(To record the receipt of fees) | ||||
Utilities expense | 523 | $1,080 | ||
Cash | 101 | $1,080 | ||
(To record the payment of utility bill, Check 1008) | ||||
Salaries expense | 517 | $9,000 | ||
Cash | 101 | $9,000 | ||
(To record the payment of salaries, Checks 1009-1011) |
Table (3)
2.
Post the journal entries in the General Ledger and identify the balance in the Account 202.
Explanation of Solution
General ledger:
General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements. In the ledger all the entries are recorded in the account order, for which the transactions actually take place.
Post the journal entries in the General Ledger:
GENERAL LEDGER | ||||||
ACCOUNT: Cash | Account No.: 101 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 1 | J1 | $ 70,000 | $ 70,000 | |||
October 2 | J1 | $ 4,000 | $ 66,000 | |||
October 6 | J2 | $ 4,100 | $ 61,900 | |||
October 7 | J2 | $ 1,670 | $ 60,230 | |||
October 10 | J2 | $ 800 | $ 59,430 | |||
October 12 | J2 | $ 4,200 | $ 63,630 | |||
October 15 | J2 | $ 300 | $ 63,930 | |||
October 18 | J2 | $ 1,750 | $ 62,180 | |||
October 20 | J2 | $ 9,500 | $ 52,680 | |||
October 27 | J3 | $ 375 | $ 52,305 | |||
October 30 | J3 | $ 4,200 | $ 56,505 | |||
October 30 | J3 | $ 1,080 | $ 55,425 | |||
October 30 | J3 | $ 9,000 | $ 46,425 | |||
ACCOUNT: Accounts receivable | Account No.: 111 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 12 | J1 | $ 1,800 | $ 1,800 | |||
October 26 | J3 | $ 4,800 | $ 6,600 | |||
October 30 | J3 | $ 4,200 | $ 2,400 |
Table (4)
GENERAL LEDGER | ||||||
ACCOUNT: Supplies | Account No.: 121 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 7 | J2 | $ 1,670 | $ 1,670 | |||
October 15 | J2 | $ 300 | $1,370 | |||
ACCOUNT: Office Equipment | Account No.: 141 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 5 | J2 | $ 18,000 | $ 18,000 | |||
October 18 | J2 | $ 3,000 | $ 21,000 | |||
ACCOUNT: Art Equipment | Account No.: 151 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 6 | J2 | $ 4,100 | $ 4,100 | |||
ACCOUNT: Accounts payable | Account No.: 202 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 5 | J2 | $ 18,000 | $ 18,000 | |||
October 18 | J2 | $ 1,250 | $ 19,250 | |||
October 20 | J3 | $ 9,500 | $ 9,750 | |||
ACCOUNT: HK Capital | Account No.: 301 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 1 | J1 | $ 70,000 | $ 70,000 | |||
ACCOUNT: HK Drawings | Account No.: 302 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
Table (5)
GENERAL LEDGER | ||||||
ACCOUNT: Fees Income | Account No.: 401 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 18 | J2 | $ 6,000 | $ 6,000 | |||
October 20 | J3 | $ 4,800 | $ 10,800 | |||
ACCOUNT: Office Cleaning Expense | Account No.: 511 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 10 | J2 | $ 800 | $ 800 | |||
ACCOUNT: Rent Expense | Account No.: 514 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 2 | J1 | $ 4,000 | $ 4,000 | |||
ACCOUNT: Salaries Expense | Account No.: 517 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 30 | J3 | $ 9,000 | $ 9,000 | |||
ACCOUNT: Telephone Expense | Account No.: 520 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 27 | J3 | $ 375 | $ 375 | |||
ACCOUNT: Utilities Expense | Account No.: 523 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
October 30 | J3 | $ 1,080 | $ 1,080 |
Table (6)
The Account 202 shows a credit balance of $9,750 at the end of the month.
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Chapter 4 Solutions
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