The Recording Process Chapter 2 Outline

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.55-59 2,3,8 1,2 X 1 3 p.59-60 X X X X 4 p.60-62 12,13 5 4,7 5 5 p.63-64 X X X X 6 p.64-73 16 X 8 5 7 p.73-76 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.

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

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).

13. (a) Cash... 9,000 Doris Wang, Capital... 9,000 Invested cash in the business. (b) Prepaid Insurance... 800 Cash... 800 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 2-4 2 Equipment... 900 Accounts Payable... 900 3 Rent Expense... 500 Cash... 500 12 Accounts Receivable... 300 Service Revenue... 300 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

12 Accounts Receivable... Service Revenue... 01,800 01,800 21 Advertising Expense... Cash... 00,200 00,200 25 Cash... Accounts Receivable... 00,700 00,700 28 Accounts Payable... Cash... 00,300 00,300 31 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... 400 Cash... 400 Purchased supplies. 6 Accounts Receivable... 800 Service Revenue... 800 Billed clients for services rendered. 10 Cash...650 Service Revenue... 650 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...500 Accounts Receivable... 500

Received cash in payment of account. 20 Accounts Receivable... 940 Service Revenue... 940 Billed clients for services provided. 25 Cash...2,000 A. Fortin, Capital... 2,000 Invested cash in business. (a) Oct. 30A. Fortin, Drawings... 300 Cash... 300 Withdrew cash for personal use. 31 Rent Expense... 250 Cash... 250 Paid rent for month. 31 Store Wages Expense... 500 Cash... 500 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... $10,200 001,240 000,400 002,000 000,300 000,500 250 $14,890 $05,000 000,500 007,000 002,390 000000 $14,890

PROBLEM 2-5A (a) & (c) Cash No. Date Explanation Ref. Balance Mar. 1 2 9 10 12 20 21 31 31 31 Balance 6,500 7,200 0,0600 12,500 03,000 9,000 800 3,000 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 00,0600 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

PROBLEM 2-5A (Continued) (a) & (c) (Continued) Accounts Payable No. 201 Date Explanation Ref. Balance Mar. 1 2 10 Balance 9,000 6,000 012,000 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. 9 20 31 6,500 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. 2 21 9,000 3,000 9,000 12,000

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. 632 201 0,9,000 0,3,000 6,000 9 Cash Admission Revenue... Received cash for admissions. 405 6,500 6,500 10 Accounts Payable ($6,000 + $3,000)... Cash... Paid balance due on Star Wars and $3,000 on account. 201 9,000 9,000 11 No entry Not a transaction. 12 Advertising Expense... Cash... Paid advertising expenses. 610 800 800

PROBLEM 2-5A (Continued) (b) (Continued) Date Account Titles and Explanation Ref. Mar. 20 Cash Admission Revenue... Received cash for admissions. 405 7,200 7,200 21 Film Rental Expense... Cash... Paid for Scream films. 632 3,000 3,000 31 Salaries Expense... Cash... Paid salaries expense. 726 3,800 3,800 31 Cash Accounts Receivable... Concession Revenue... Received cash and balance on account for concession revenue. 112 406 0,0600 0,0600 0,1,200 31 Cash Admission Revenue... Received cash for admissions. 405 12,500 12,500

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 0,0600 042,000 018,000 016,000 000,800 12,000 0003,800 $116,400 $ 9,000 080,000 026,200 001,200 0000000 $116,400 Objective 6 16. 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 2,600 10 2,400 31 900 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. 31 900 Aug. 1 2,600 500 2,600

Office Equipment Service Revenue Aug. 12 4,000 Aug. 10 2,400 25 1,400 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 04,000 00000 $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... $16,800 003,500 004,500 018,600 002,400 $45,800 $03,000 002,200 015,000 025,600 0000-00 $45,800

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 $14,567 008,642 001,968 049,360 000,700 004,428 000,758 000,961 000,523 $81,907 $18,450 007,396 000,815 044,636 010,610 000,000 $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

(b) CYBERDYNE REPAIR SERVICE Statement of Owner's Equity For the Month Ended January 31, 2003 Leo Mataruka, Capital, January 1, 2003... $43,000 Add: Net income... 2,000... 45,000 Less: Drawings... 5,000 Leo Mataruka, Capital, January 31, 2003... $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... 001,500 Shop equipment... 04421,000 Total assets... $46,000 Liabilities and Owner's Equity Liabilities Accounts payable... 0 $ 6,000 Owner's Equity Leo Mataruka, Capital... 040,000 Total liabilities and owner's equity... $46,000