Recording Business Transactions

When are credits increases? When are credits decreases?

What are the four parts of a journal entry?

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E). 1. Rent Expense 6. Accounts Payable 2. Common Stock 7. Unearned Revenue 3. Furniture 8. Notes Receivable 4. Service Revenue 9. Dividends 5. Prepaid Insurance 10. Insurance Expense

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E). 1. Rent Expense 6. Accounts Payable 2. Common Stock 7. Unearned Revenue 3. Furniture 8. Notes Receivable 4. Service Revenue 9. Dividends 5. Prepaid Insurance 10. Insurance Expense

For each account, identify if the change would be recorded as a debit (DR) or credit (CR). 

11. Increase to Cash 16. Increase to Interest Revenue 

12. Decrease to Accounts Payable 17. Increase to Rent Expense 

13. Increase to Common Stock 18. Decrease to Office Supplies 

14. Increase to Unearned Revenue 19. Increase to Prepaid Rent 

15. Decrease to Accounts Receivable 20. Increase to Notes Payable

For each account, identify if the change would be recorded as a debit (DR) or credit (CR). 

11. Increase to Cash 16. Increase to Interest Revenue 

12. Decrease to Accounts Payable 17. Increase to Rent Expense 

13. Increase to Common Stock 18. Decrease to Office Supplies 

14. Increase to Unearned Revenue 19. Increase to Prepaid Rent 

15. Decrease to Accounts Receivable 20. Increase to Notes Payable

EMB Consulting Services had the following transactions for the month of November. Journalize the transactions and include an explanation with each entry. 

Nov. 1 The business received \(10,000 cash and issued common stock. 

15 Purchased office supplies on account, \)400. 

18 Paid advertising bill, \(150. 

20 Received \)1,000 from customers for services rendered. 

28 Cash dividends of $500 were paid to stockholders

EMB Consulting Services had the following transactions for the month of November. Journalize the transactions and include an explanation with each entry. 

Nov. 1 The business received \(10,000 cash and issued common stock. 

15 Purchased office supplies on account, \)400. 

18 Paid advertising bill, \(150. 

20 Received \)1,000 from customers for services rendered. 

28 Cash dividends of $500 were paid to stockholders

Using the following accounts and their balances, prepare the trial balance for Cooper Furniture Repair as of December 31, 2018. All accounts have normal balances. 

Cash \( 7,000                                  Advertising Expense \) 1,200 

Unearned Revenue 4,500           Utilities Expense 800 

Equipment 10,000                        Rent Expense 5,000 

Service Revenue 8,000                Accounts Payable 2,300 

Common Stock 12,200                Dividends 3,000

Using the following accounts and their balances, prepare the trial balance for Cooper Furniture Repair as of December 31, 2018. All accounts have normal balances. 

Cash \( 7,000                                  Advertising Expense \) 1,200 

Unearned Revenue 4,500           Utilities Expense 800 

Equipment 10,000                        Rent Expense 5,000 

Service Revenue 8,000                Accounts Payable 2,300 

Common Stock 12,200                Dividends 3,000

 Using the following accounts and their balances, calculate the debt ratio for Cooper Furniture Repair as of December 31.

Cash \( 7,000                                  Advertising Expense \) 1,200 

Unearned Revenue 4,500           Utilities Expense 800 

Equipment 10,000                        Rent Expense 5,000 

Service Revenue 8,000                Accounts Payable 2,300 

Common Stock 12,200                Dividends 3,000

Using the following accounts and their balances, calculate the debt ratio for Cooper Furniture Repair as of December 31.

Cash \( 7,000                                  Advertising Expense \) 1,200 

Unearned Revenue 4,500           Utilities Expense 800 

Equipment 10,000                        Rent Expense 5,000 

Service Revenue 8,000                Accounts Payable 2,300 

Common Stock 12,200                Dividends 3,000

Identifying accounts Consider the following accounts and identify each account as an asset (A), liability (L), or equity (E). a. Notes Receivable b. Common Stock c. Prepaid Insurance d. Notes Payable e. Rent Revenue f. Taxes Payable g. Rent Expense h. Furniture i. Dividends j. Unearned Revenue

Identify the three categories of the accounting equation, and list at least four accounts associated with each category.

What is the purpose of the chart of accounts? Explain the numbering typically associated with the accounts.

What does a ledger show? What’s the difference between a ledger and a chart of accounts?

Accounting uses a double-entry system. Explain what this sentence means

What is a T-account? On which side is the debit? On which side is the credit? Where does the account name go on a T-account?

When are debits increases? When are debits decreases?

Identify which types of accounts have a normal debit balance and which types of accounts have a normal credit balance.

What are source documents? Provide examples of source documents that a business might use

Where are transactions initially recorded?

Explain the five steps in journalizing and posting transactions.

What is involved in the posting process?

What is the purpose of the trial balance?

What is the difference between the trial balance and the balance sheet?

If total debits equal total credits on the trial balance, is the trial balance error-free? Explain your answer.

What is the calculation for the debt ratio? Explain what the debt ratio evaluates.

Identifying increases and decreases in accounts For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). a. Increase to Accounts Receivable b. Decrease to Unearned Revenue c. Decrease to Cash d. Increase to Interest Expense e. Increase to Salaries Payable f. Decrease to Prepaid Rent g. Increase to Common Stock h. Increase to Notes Receivable i. Decrease to Accounts Payable j. Increase to Interest Revenue

Identifying normal balances For each account, identify whether the normal balance is a debit (DR) or credit (CR). a. Notes Payable b. Dividends c. Service Revenue d. Land e. Unearned Revenue f. Common Stock g. Utilities Expense h. Office Supplies i. Advertising Expense j. Interest Payable

 Calculating the balance of a T-account 

                  Accounts Payable 

May 2 6,000           21,000   May 1 

 May 22 11,500     500        May 5 

                                 8,500    May 15 

                                 500        May 23

Calculate the Accounts Payable balance.

Journalizing transactions John Daniel opened a medical practice in Sacramento, California, and had the following transactions during the month of January. 

Jan. 1 The business received \(34,000 cash and issued common stock to Daniel. 

2 Purchased medical supplies on account, \)17,000. 

4 Performed services for patients receiving \(1,600. 

12 Paid monthly office rent of \)3,000. 

15 Recorded $7,000 revenue for services rendered to patients on account. 

Journalize the transactions of John Daniel, M.D. Include an explanation with each entry.

Journalizing transactions 

Harper Sales Consultants completed the following transactions during the latter part of January: 

Jan. 22 Performed services for customers on account, \(7,500. 

30 Received cash on account from customers, \)8,000. 

31 Received a utility bill, \(220, which will be paid during February. 

31 Paid monthly salary to salesman, \)2,500. 

31 Received \(2,310 for three months of consulting service to be performed starting in February. 

31 Cash dividends of \)950 were paid to stockholders. 

Journalize the transactions of Harper Sales Consultants. Include an explanation with each journal entry.

Journalizing transactions and posting to T-accounts 

Roland Foster Optical Dispensary completed the following transactions during the latter part of March: 

Mar. 15 Purchased office supplies on account, \(3,400. 

28 Paid \)1,800 on account.

 Requirements 

 Journalizing transactions and posting to T-accounts 

Roland Foster Optical Dispensary completed the following transactions during the latter part of March: 

Mar. 15 Purchased office supplies on account, \(3,400. 

28 Paid \)1,800 on account.

 Requirements ,

2. Open the following accounts (use T-account format): Cash (Beginning Balance of $21,000), Office Supplies, and Accounts Payable. Post the journal entries from Requirement 1 to the accounts, and compute the balance in each account.

Preparing a trial balance 

Smithson Floor Coverings reported the following summarized data at December 31, 2018. Accounts appear in no particular order, and all have normal balances. 

Service Revenue \( 26,000 Salaries Payable \) 25,000 

Equipment 36,000 Salaries Expense 1,600 

Rent Expense 17,000 Cash 7,000 

Common Stock 24,000 Accounts Receivable 3,600 

Accounts Payable 2,200 Interest Payable 6,000 

Dividends 16,100 Utilities Expense 1,900 

Prepare the trial balance of Smithson Floor Coverings at December 31, 2018

Calculating debt ratio 

Aladdin Carpet Care had the following total assets, liabilities, and equity as of October 31: 

Assets $ 200,000 

Liabilities 30,000 

Equity 170,000 

What is Aladdin Carpet Care’s debt ratio as of October 31?

Using accounting vocabulary 

Match the accounting terms with the corresponding definitions. 

. Posting 2. Account 3. Debit 4. Journal 5. Chart of accounts 6. Trial balance 7. Normal balance 8. Ledger 9. Credit 10. Compound journal entry a. A detailed record of all increases and decreases that have occurred in a particular asset, liability, or equity during a period b. The record holding all the accounts of a business, the changes in those accounts, and their balances c. A journal entry that is characterized by having multiple debits and/or multiple credits d. A record of transactions in date order e. Left side of a T-account f. Side of an account where increases are recorded g. Transferring amounts from the journal to the ledger h. Right side of a T-account i. A list of all accounts with their balances at a point in time j. A list of all accounts with their account numbers

Creating a chart of accounts Raymond Autobody Shop has the following accounts: 

Accounts Payable         Service Revenue 

Cash                                Equipment 

Utilities Expense           Common Stock 

Automotive Supplies   Advertising Expense 

Dividends                      Unearned Revenue 

Retained Earnings 

Create a chart of accounts for Raymond Autobody Shop using the standard numbering system. Each account is separated by a factor of 10. For example, the first asset account will be 100 and the next asset account will 110

Identifying accounts, increases in accounts, and normal balances 

a. Interest Revenue b. Accounts Payable 

c. Common Stock d. Office Supplies 

e. Advertising Expense f. Unearned Revenue 

g. Prepaid Rent h. Utilities Expense 

i. Dividends j. Service Revenue 

Requirements 1. Identify each account as asset (A), liability (L), or equity (E).

Identifying accounts, increases in accounts, and normal balances 

a. Interest Revenue b. Accounts Payable 

c. Common Stock d. Office Supplies 

e. Advertising Expense f. Unearned Revenue 

g. Prepaid Rent h. Utilities Expense 

i. Dividends j. Service Revenue 

Requirements 2. Identify whether the account is increased with a debit (DR) or credit (CR).

Identifying accounts, increases in accounts, and normal balances 

a. Interest Revenue b. Accounts Payable 

c. Common Stock d. Office Supplies 

e. Advertising Expense f. Unearned Revenue 

g. Prepaid Rent h. Utilities Expense 

i. Dividends j. Service Revenue 

Requirements 3. Identify whether the normal balance is a debit (DR) or credit (CR).

Identifying increases and decreases in accounts and normal balances Insert the missing information into the accounting equation. Signify increases as Incr. and decreases as Decr.

Identifying source documents For each transaction, identify a possible source document. 

a. The business received \(20,000 cash and issued common stock to stockholders. 

b. Purchased office supplies on account, \)500. 

c. Recorded $1,000 revenue for services rendered to customers.

Analyzing and journalizing transactions 

As the manager of Margarita Mexican Restaurant, you must deal with a variety of business transactions. Provide an explanation for the following transactions: 

a. Debit Equipment and credit Cash. 

b. Debit Dividends and credit Cash. 

c. Debit Wages Payable and credit Cash. 

d. Debit Equipment and credit Common Stock. 

e. Debit Cash and credit Unearned Revenue. 

f. Debit Advertising Expense and credit Cash. 

g. Debit Cash and credit Service Revenue

The following transactions occurred for Lawrence Engineering: 

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock. 

4 Paid utilities expense of \)370. 

5 Purchased equipment on account, \(1,600. 

10 Performed services for a client on account, \)2,900. 

12 Borrowed \(7,100 cash, signing a notes payable. 

19 Cash dividends of \)200 were paid to stockholders. 

21 Purchased office supplies for $840 and paid cash. 

27 Paid the liability from July 5.

Analyzing and journalizing transactions 

Journalize the transactions of Lawrence Engineering. Include an explanation with each journal entry. Use the following accounts: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Question: The following transactions occurred for Lawrence Engineering: 

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock. 

4 Paid utilities expense of \)370. 

5 Purchased equipment on account, \(1,600. 

10 Performed services for a client on account, \)2,900. 

12 Borrowed \(7,100 cash, signing a notes payable. 

19 Cash dividends of \)200 were paid to stockholders. 

21 Purchased office supplies for $840 and paid cash. 

27 Paid the liability from July 5.

Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Question: The following transactions occurred for Lawrence Engineering: 

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock. 

4 Paid utilities expense of \)370. 

5 Purchased equipment on account, \(1,600. 

10 Performed services for a client on account, \)2,900. 

12 Borrowed \(7,100 cash, signing a notes payable. 

19 Cash dividends of \)200 were paid to stockholders. 

21 Purchased office supplies for $840 and paid cash. 

27 Paid the liability from July 5.

Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Question: The following transactions occurred for Lawrence Engineering: 

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock. 

4 Paid utilities expense of \)370. 

5 Purchased equipment on account, \(1,600. 

10 Performed services for a client on account, \)2,900. 

12 Borrowed \(7,100 cash, signing a notes payable. 

19 Cash dividends of \)200 were paid to stockholders. 

21 Purchased office supplies for $840 and paid cash. 

27 Paid the liability from July 5.

Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Question: The following transactions occurred for Wilke Technology Solutions: 

May 1 The business received cash of \(105,000 and issued common stock to Zoe Wilke. 

2 Purchased office supplies on account, \)550. 

4 Paid \(57,000 cash for building and land. The building had a fair market value of \)45,000. 

6 Performed services for customers and received cash, \(3,600. 

9 Paid \)350 on accounts payable. 

17 Performed services for customers on account, \(3,500. 

19 Paid rent expense for the month, \)1,200. 

20 Received \(1,500 from customers for services to be performed next month. 

21 Paid \)900 for advertising in next month’s IT Technology magazine. 

23 Received \(3,100 cash on account from a customer. 

31 Incurred and paid salaries, \)1,700.

Analyzing and journalizing transactions 

Journalize the transactions of Wilke Technology Solutions. Include an explanation with each journal entry. Use the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Advertising; Land; Building; Accounts Payable; Unearned Revenue; Common Stock; Service Revenue; Rent Expense; and Salaries Expense