The Recording Process Chapter 2 Outline

Transcription

1 The Recording Process Chapter 2 Outline Focused study objectives: 1. EXPLAIN WHAT AN ACCOUNT IS AND HOW IT HELPS IN THE RECORDING PROCESS. 2. DEFINE DEBITS AND CREDITS AND ILLUSTRATE HOW THEY ARE USED TO RECORD BUSINESS TRANSACTIONS. 3. DESCRIBE THE BASIC STEPS IN THE RECORDING PROCESS. 4. EXPLAIN WHAT A JOURNAL IS AND HOW IT HELPS IN THE RECORDING PROCESS, AND JOURNALIZE BUSINESS TRANSACTIONS. 5. EXPLAIN WHAT A LEDGER IS AND HOW IT HELPS IN THE RECORDING PROCESS. 6. EXPLAIN WHAT POSTING IS AND HOW IT HELPS IN THE RECORDING PROCESS. 7. EXPLAIN THE PURPOSE OF, AND PREPARE A TRIAL BALANCE. Study Objective Textbook Pages to Read To Do: Questions Brief Exercises Exercises Problems 1 p. 54 X X X X 2 p ,3,8 1,2 X 1 3 p X X X X 4 p ,13 5 4,7 5 5 p X X X X 6 p X p x 9 7,8,10 5,8 Use the text info and the powerpoint handout package to help you complete the questions. Solutions will be posted in class and online.

2 Solutions Objective 2 Questions 02. Disagree. The terms debit and credit are synonymous with the left and right sides of an account, respectively. Whether they mean increase or decrease depends on the type of account being considered. 03. Jos is incorrect. The double-entry system merely records the effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect on the equation. 08. (a) Supplies and credit Accounts Payable. (b) Cash and credit Notes Payable. (c) Salaries Expense and credit Cash. BRIEF EXERCISE 2-1 (a) Effect (a) Effect (b) Normal Balance 1. Accounts Payable 2. Advertising Expense 3. Service Revenue 4. Accounts Receivable 5. J. Takamoto, Capital 6. J. Takamoto, Drawings 7. Prepaid Insurance 8. Office Equipment 9. Rent Expense 10. Unearned Revenue 11. Advertising Supplies 12. Notes Payable BRIEF EXERCISE 2-2 Account ed Account ed June 1 Cash D. Ing, Capital 2 Equipment Accounts Payable 3 Rent Expense Cash 12 Accounts Receivable Service Revenue PROBLEM 2-1A

3 Account (1) Type of Account (2) Financial Statement (3) Normal Balance (4) 1. Cash Asset Balance Sheet 2. Accounts Receivable 3. Drawings Owner s Equity Drawings 4. Interest Expense Asset Balance Sheet Expense Statement of Owner s Equity Income Statement 5. Land Asset Balance Sheet 6. Office Supplies Asset Balance Sheet (5) 7. Salary Expense Owner s Equity Expense Income Statement 8. Service Revenue Owner s Equity Revenue Income Statement \ Objective 4 Questions 12. When three or more accounts are required in one journal entry, the entry is referred to as a compound entry. An example of a compound entry is the purchase of equipment, part of which is paid for with cash and the remainder is on account ( Equipment, credit Cash and credit Accounts Payable).

4 13. (a) Cash... 9,000 Doris Wang, Capital... 9,000 Invested cash in the business. (b) Prepaid Insurance Cash Paid one-year insurance policy. (c) Supplies... 1,500 Accounts Payable... 1,500 Purchased supplies on account. (d) Cash... 7,500 Service Revenue... 7,500 Received cash for services rendered. BRIEF EXERCISE 2-5 June 1Cash 2,000 D. Ing, Capital... 2,000 EXERCISE Equipment Accounts Payable Rent Expense Cash Accounts Receivable Service Revenue GENERAL JOURNAL Date Account Titles and Explanation Ref. March 3 Cash... L. Visser, Capital... 8,000 J1 8,000 6 Equipment (or Vehicle)... Cash... 04,000 04,000 7 Supplies... Accounts Payable... 00,500 00,500

5 12 Accounts Receivable... Service Revenue... 01,800 01, Advertising Expense... Cash... 00,200 00, Cash... Accounts Receivable... 00,700 00, Accounts Payable... Cash... 00,300 00, L. Visser, Drawings... Cash... 00,500 00,500 EXERCISE 2-7 (a) Oct. 1Cash 5,000 A. Fortin, Capital... 5,000 Invested cash in business. 3 Furniture... 2,000 Accounts Payable... 2,000 Purchased furniture on account. 4 Supplies Cash Purchased supplies. 6 Accounts Receivable Service Revenue Billed clients for services rendered. 10 Cash Service Revenue Received cash for services rendered. 10 Cash...5,000 Notes Payable... 5,000 Obtained loan from bank. 12 Accounts Payable... 1,500 Cash... 1,500 Paid cash on account. 20 Cash Accounts Receivable

6 Received cash in payment of account. 20 Accounts Receivable Service Revenue Billed clients for services provided. 25 Cash...2,000 A. Fortin, Capital... 2,000 Invested cash in business. (a) Oct. 30A. Fortin, Drawings Cash Withdrew cash for personal use. 31 Rent Expense Cash Paid rent for month. 31 Store Wages Expense Cash Paid store wages. (b) FORTIN CO. Trial Balance October 31, 2003 Cash... Accounts Receivable... Supplies... Furniture... Notes Payable... Accounts Payable... A. Fortin, Capital... A. Fortin, Drawings... Service Revenue... Store Wages Expense... Rent Expense... $10, , , , , , $14,890 $05, , , , $14,890

7 PROBLEM 2-5A (a) & (c) Cash No. Date Explanation Ref. Balance Mar Balance 6,500 7,200 0, ,500 03,000 9, ,000 3,800 16,000 13,000 19,500 10,500 9,700 16,900 13,900 10,100 10,700 23,200 Accounts Receivable No. 112 Date Explanation Ref. Balance Mar. 31 0, ,0600 Land No. 140 Date Explanation Ref. Balance Mar. 1 Balance 42,000 Buildings No. 145 Date Explanation Ref. Balance Mar. 1 Balance 018,000 Equipment No. 157 Date Explanation Ref. Balance Mar. 1 Balance 016,000

8 PROBLEM 2-5A (Continued) (a) & (c) (Continued) Accounts Payable No. 201 Date Explanation Ref. Balance Mar Balance 9,000 6, ,000 18,000 9,000 L. Baroni, Capital No. 301 Date Explanation Ref. Balance Mar. 1 Balance 80,000 Admission Revenue No. 405 Date Explanation Ref. Balance Mar ,500 7,200 12,500 06,500 13,700 26,200 Concession Revenue No. 406 Date Explanation Ref. Balance Mar. 31 0,1,200 00,1,200 Advertising Expense No. 610 Date Explanation Ref. Balance Mar. 12 0,800 0,800 Film Rental Expense No. 632 Date Explanation Ref. Balance Mar ,000 3,000 9,000 12,000

9 PROBLEM 2-5A (Continued) (a) & (c) (Continued) Salaries Expense No. 726 Date Explanation Ref. Balance Mar. 31 3,800 3,800 (b) GENERAL JOURNAL Date Account Titles and Explanation Ref. Mar. 2 Film Rental Expense Cash Accounts Payable Paid film rental. 3 No entry not a transaction ,9,000 0,3,000 6,000 9 Cash Admission Revenue... Received cash for admissions ,500 6, Accounts Payable ($6,000 + $3,000)... Cash... Paid balance due on Star Wars and $3,000 on account ,000 9, No entry Not a transaction. 12 Advertising Expense... Cash... Paid advertising expenses

10 PROBLEM 2-5A (Continued) (b) (Continued) Date Account Titles and Explanation Ref. Mar. 20 Cash Admission Revenue... Received cash for admissions ,200 7, Film Rental Expense... Cash... Paid for Scream films ,000 3, Salaries Expense... Cash... Paid salaries expense ,800 3, Cash Accounts Receivable... Concession Revenue... Received cash and balance on account for concession revenue ,0600 0,0600 0,1, Cash Admission Revenue... Received cash for admissions ,500 12,500

11 PROBLEM 2-5A (Continued) (d) STARLITE THEATRE Trial Balance March 31, 2003 Cash... Accounts Receivable... Land... Buildings... Equipment... Accounts Payable... L. Baroni, Capital... Admission Revenue... Concession Revenue... Advertising Expense... Film Rental Expense... Salaries Expense... $ 23,200 0, , , , ,800 12, ,800 $116,400 $ 9, , , , $116,400 Objective The advantage of the last step in the posting process is to indicate that the item has been posted, and to provide a cross-reference. EXERCISE 2-8 (a) Aug. 01 2, , Cash Notes Payable Aug. 12 1,000 Aug. 12 3,000 4,900 3,000 Accounts Receivable L. Meche, Capital Aug. 25 1,400 Aug Aug. 1 2, ,600

12 Office Equipment Service Revenue Aug. 12 4,000 Aug. 10 2, ,400 4,000 3,800 (b) L. MECHE, INVESTMENT BROKER Trial Balance August 31, 2003 Cash... Accounts Receivable... Office Equipment... Notes Payable... L. Meche, Capital... Service Revenue... Objective 7 BRIEF EXERCISE 2-9 BOURQUE COMPANY Trial Balance December 31, 2002 $4,900 00,500 04, $9,400 $3,000 02,600 03,800 $9,400 Cash... Prepaid Insurance... Accounts Payable... Unearned Revenue... Bourque, Capital... Bourque, Drawings... Service Revenue... Salaries Expense... Rent Expense... $16, , , , ,400 $45,800 $03, , , , $45,800

13 EXERCISE 2-10 EXPRESS DELIVERY SERVICE Trial Balance July 31, 2003 Cash ($81,907 $67,340 total debits without Cash) Accounts Receivable Prepaid Insurance... Delivery Equipment... Notes Payable... Accounts Payable... Salaries Payable... T. Weld, Capital... T. Weld, Drawings... Service Revenue... Salaries Expense... Gas and Oil Expense... Repair Expense... Insurance Expense... PROBLEM 2-8A $14, , , , , , , , ,523 $81,907 $18, , , , , ,000 $81,907 (a) CYBERDYNE REPAIR SERVICE Income Statement For the Month Ended January 31, 2003 Revenues Repair services revenue... $13,000 Expenses Wages expense... $3,000 Rent expense... 1,500 Repair parts expense... 4,000 Miscellaneous expense... 00,2,000 Advertising expense... 00, 500 Total expenses... 11,000 Net income... $ 2,000

14 (b) CYBERDYNE REPAIR SERVICE Statement of Owner's Equity For the Month Ended January 31, 2003 Leo Mataruka, Capital, January 1, $43,000 Add: Net income... 2, ,000 Less: Drawings... 5,000 Leo Mataruka, Capital, January 31, $40,000 (c) CYBERDYNE REPAIR SERVICE Balance Sheet January 31, 2003 Assets Cash... $ 1,500 Accounts receivable... 11,000 Repair parts inventory 11,000 Prepaid rent ,500 Shop equipment ,000 Total assets... $46,000 Liabilities and Owner's Equity Liabilities Accounts payable... 0 $ 6,000 Owner's Equity Leo Mataruka, Capital ,000 Total liabilities and owner's equity... $46,000