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Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Recording Business Transactions Transactions Chapter 2
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Page 1: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

1

Recording Business Recording Business TransactionsTransactions

Recording Business Recording Business TransactionsTransactions

Chapter 2

Page 2: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

2

Objective 1Objective 1Objective 1Objective 1

Use accounting terms

Page 3: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 4

AccountAccountAccountAccount

• Basic summary device

• Detailed record of increases and decreases in specific assets, liabilities, or owner’s equity during a period

Page 4: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 5

LedgerLedgerLedgerLedger

• Book or printout holding all the accounts

Page 5: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 6

LiabilitiesLiabilities EquityEquityAssetsAssets = +

Accounting EquationAccounting EquationAccounting EquationAccounting Equation

Accounts are grouped in 3 broad categories:

Page 6: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 7

AssetsAssetsAssetsAssets

Economic resources that will benefit the business in the future

• Cash• Accounts Receivable• Notes Receivable• Prepaid Expenses• Land• Building• Equipment, Furniture, Fixtures

Page 7: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 8

LiabilitiesLiabilitiesLiabilitiesLiabilities

Creditors’ claims to assets (debt)

• Accounts Payable

• Notes Payable

• Accrued Liabilities

Page 8: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 9

Owner’s EquityOwner’s EquityOwner’s EquityOwner’s Equity

Owner’s claim to the assets

• Capital

• Withdrawals

• Revenues

• Expenses

Page 9: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 10

RevenuesRevenues

NotesPayable

NotesPayable

Accounts Receivable

C. Lapp,Capital

C. Lapp,Capital

AccountsPayable

AccountsPayable

LedgerLedger

CashCash

All Individual Accounts Combined All Individual Accounts Combined Make Up the LedgerMake Up the Ledger

All Individual Accounts Combined All Individual Accounts Combined Make Up the LedgerMake Up the Ledger

Page 10: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 11

Chart of AccountsChart of AccountsChart of AccountsChart of Accounts

• List of all accounts used by a company along with the account numbers

Page 11: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

12

Objective 2Objective 2Objective 2Objective 2

Apply the rules of debit and credit

Page 12: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 13

Double Entry SystemDouble Entry SystemDouble Entry SystemDouble Entry System

• Record dual effects of each transaction

• Each transaction affects at least two accounts

• Each transaction is recorded with at least– One debit– One credit

• Total debits must equal total credits

Page 13: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 14

Account Name

(Left Side) Debit

(Right Side) Credit

Simple tool for analyzing and determining the balance in a given account

T-AccountT-AccountT-AccountT-Account

Page 14: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 15

Debit CreditDebit Credit

AssetsAssets

+ + --

Rules of Debit and CreditRules of Debit and CreditRules of Debit and CreditRules of Debit and Credit

LiabilitiesLiabilities EquityEquity== ++Debit CreditDebit Credit - +- +

Debit CreditDebit Credit - +- +

Page 15: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 16

Rules of Debit and CreditRules of Debit and CreditRules of Debit and CreditRules of Debit and Credit

Owner’s EquityOwner’s EquityDebit CreditDebit Credit - +- +

RevenuesRevenues

- +- +Debit CreditDebit Credit

Owner’s Owner’s CapitalCapital

Debit CreditDebit Credit - +- +

Owner’s Owner’s WithdrawalsWithdrawals

Debit CreditDebit Credit + + --

ExpensesExpenses

Debit CreditDebit Credit

+ + --

Page 16: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 17

RevenuesRevenues ExpensesExpensesOwner’s Owner’s CapitalCapital

Owner’s Owner’s WithdrawalsWithdrawals

__ ++ __

Expanding the Expanding the Rules of Debit and CreditRules of Debit and Credit

Expanding the Expanding the Rules of Debit and CreditRules of Debit and Credit

Owner’s Equity

Debit CreditDebit Credit - +- +

Debit CreditDebit Credit

- +- +Debit CreditDebit Credit + + --

Debit CreditDebit Credit + + --

Page 17: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 18

Remember: Just ask ALICE!Remember: Just ask ALICE!Remember: Just ask ALICE!Remember: Just ask ALICE!

Debit Credit

+ A = Assets -

- L = Liabilities +

- I = Income* +

- C = Capital +

+ E = Expenses -

* Really, this is revenues, but “r” just doesn’t fit in!

The first and the last are increased

with a debit

The middle three are increased with

credits

Page 18: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 19

LiabilitiesLiabilities EquityEquityAssetsAssets == ++Normal BalancesNormal BalancesNormal BalancesNormal Balances

Debit CreditDebit Credit

+ -+ -Debit CreditDebit Credit

- +- +Debit CreditDebit Credit

- +- +

NormalNormalBalanceBalance

NormalNormalBalanceBalance

NormalNormalBalanceBalance

Page 19: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 20

++++

Owner’s Equity

Normal BalancesNormal BalancesNormal BalancesNormal Balances

Debit CreditDebit Credit

+ -+ -Debit Debit CreditCredit- +- +

Debit CreditDebit Credit

- +- +

NormalNormalBalanceBalance

NormalNormalBalanceBalance

NormalNormalBalanceBalance

RevenuesRevenuesRevenuesRevenues ExpensesExpensesExpensesExpensesOwner’s Owner’s CapitalCapital

Owner’s Owner’s CapitalCapital

Owner’s Owner’s WithdrawalsWithdrawals

Owner’s Owner’s WithdrawalsWithdrawals

____ ____Debit CreditDebit Credit

+ -+ -

NormalNormalBalanceBalance

Page 20: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

21

Objective 3Objective 3Objective 3Objective 3

Record transactions in the journal

Page 21: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 22

JournalJournalJournalJournal

• Chronological record of the transactions

• Consists of at least one debit and one credit

Page 22: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 23

Journalizing TransactionsJournalizing TransactionsJournalizing TransactionsJournalizing Transactions

• Identify each account affected and its type

• Determine whether each account is increased or decreased. Use the rules of debit and credit

• Record transaction in journal, including a brief explanation– Debit side of entry is entered first– Total debits should always equal total credits

Page 23: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 24

General JournalGeneral JournalGeneral JournalGeneral Journal

Journal Page 1

Date Description Debit Credit

Jul 1 Cash 45,000

Lange, Capital 45,000

Investment from owner

Accounts AffectedAccounts Affected

Dollar amount of debits and credits

Dollar amount of debits and credits

Explanation of transaction

Explanation of transaction

Transaction Date

Transaction Date

Page 24: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 25

General JournalGeneral JournalGeneral JournalGeneral Journal

Style conventions that must be followed:• Year is entered at the top of each page• The month is only entered for the first entry

on a page unless the month changes in the middle of the page. The month may be abbreviated

• Enter numerical date for each transaction, even if there are many entries on same date

Page 25: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 26

General JournalGeneral JournalGeneral JournalGeneral Journal

• Debits are ALWAYS entered first in an entry. Use the EXACT account title and do not abbreviate

• Credits are INDENTED and listed second

• Do not use dollar signs

• SKIP A LINE between each entry

• Never split an entry between two pages

Page 26: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 27

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 1 transaction:

• Cash is increasing

• Cash is an asset account

• Increase an asset with a debitGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 1 Cash 25,000

Page 27: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 28

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 1 transaction:

• M. Brown, Capital is increasing

• Capital is an owner’s equity account

• Increase owner’s equity with a creditGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 1 Cash 25,000

M. Brown, Capital 25,000

Owner invested in business

Page 28: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 29

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 2 transaction:

• Medical Supplies is increasing

• Medical Supplies is an asset account

• Increase an asset with a debitGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Medical Supplies 10,000

Page 29: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 30

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 2 transaction:

• Accounts Payable is increasing

• Accounts Payable is a liability account

• Increase a liability with a creditGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Medical Supplies 10,000

Accounts Payable 10,000

Purchased medical supplies

Page 30: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 31

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 2 transaction:

• Rent Expense is increasing

• Rent Expense is an expense account

• Increase an expense with a debitGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Rent Expense 4,000

Page 31: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 32

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 2 transaction:

• Cash is decreasing

• Cash is an asset account

• Decrease an asset with a creditGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Rent Expense 4,000

Cash 4,000

Paid rent for the month

Page 32: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 33

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 3 transaction:

• Accounts Receivable is increasing

• Accounts Receivable is an asset account

• Increase an asset with a debitGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 3 Accounts Receivable 12,000

Page 33: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 34

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Analysis of June 3 transaction:

• Service Revenue is increasing

• Service Revenue is a revenue account

• Increase a revenue with a creditGENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Jun 3 Accounts Receivable 12,000

Service Revenue 12,000

Performed services

Page 34: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

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Objective 4Objective 4Objective 4Objective 4

Post from the journal to the ledger

Page 35: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 36

PostingPostingPostingPosting

• Periodically, journal entries are posted to ledger accounts to determine balances in each account

• Posting – copying amounts from the journal to the ledger

Page 36: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 37

Exercise 2-9Exercise 2-9Exercise 2-9Exercise 2-9Cash Accounts Payable Service Revenue

Accounts Receivable M. Brown, Capital Rent Expense

Medical Supplies

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Jun 1 Cash 25,000

M. Brown, Capital 25,000

Owner invested in business

25,000

25,000

25,000

25,000

Page 37: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 38

Cash

25,000

Accounts Payable Service Revenue

M. Brown, Capital Rent Expense

25,000

Accounts Receivable

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Medical Supplies 10,000

Accounts Payable 10,000

Purchased medical supplies

Exercise 2-9Exercise 2-9Exercise 2-9Exercise 2-9

Medical Supplies

10,000

10,000

10,000

10,000

Page 38: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 39

Cash

25,000

Accounts Payable Service Revenue

M. Brown, Capital Rent Expense

25,000

Accounts Receivable

Exercise 2-9Exercise 2-9Exercise 2-9Exercise 2-9

Medical Supplies10,000

10,000

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Jun 2 Rent Expense 4,000

Cash 4,000

Paid rent for the month

4,000

4,000

4,000

4,000

Page 39: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 40

Cash

25,000

Accounts Payable Service Revenue

M. Brown, Capital Rent Expense

25,000

Accounts Receivable

Exercise 2-9Exercise 2-9Exercise 2-9Exercise 2-9

Medical Supplies10,000

10,0004,000

4,000

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Jun 3 Accounts Receivable 12,000

Service Revenue 12,000

Performed services

12,000

12,000

12,000

12,000

Page 40: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 41

Cash

25,000

Accounts Payable Service Revenue

M. Brown, Capital Rent Expense

25,000

Accounts Receivable

Exercise 2-9Exercise 2-9Exercise 2-9Exercise 2-9

Medical Supplies10,000

10,0004,000

4,00012,000

12,000Bal 21,000Bal 21,000 Bal 10,000Bal 10,000 Bal 12,000Bal 12,000

Bal 4,000Bal 4,000Bal 25,000Bal 25,000Bal 12,000Bal 12,000

Bal 10,000Bal 10,000

Page 41: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 42

Flow of Accounting DataFlow of Accounting DataFlow of Accounting DataFlow of Accounting Data

Transaction Occurs

Source Documents Prepared

Transaction Analyzed

Transaction Journalized & Posted

Page 42: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

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Objective 5Objective 5Objective 5Objective 5

Prepare and use a trial balance

Page 43: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 44

Trial BalanceTrial BalanceTrial BalanceTrial Balance

• List of all accounts with their balances

Page 44: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 45

Mike Brown, M.D.

Trial Balance

June 30, 2008

Cash 21,000

Accounts Receivable 12,000

Medical Supplies 10,000

Accounts Payable 10,000

M. Brown, Capital 25,000

Service Revenue 12,000

Rent Expense 4,000

Totals 47,000 47,000

Exercise 2-9 (part 3)Exercise 2-9 (part 3)Exercise 2-9 (part 3)Exercise 2-9 (part 3)

Page 45: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 46

Locating Trial Balance ErrorsLocating Trial Balance ErrorsLocating Trial Balance ErrorsLocating Trial Balance Errors

What if it doesn’t balance?

• Is the addition correct?

• Are all accounts listed?

• Are the balances listed correctly?

Page 46: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 47

Locating Trial Balance ErrorsLocating Trial Balance ErrorsLocating Trial Balance ErrorsLocating Trial Balance Errors

• Divide the difference by two– Is there a debit/credit balance for this amount

posted in the wrong column?

• Divide the difference by 9. If evenly divisible, the error may be a slide or transposition error

Page 47: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 48

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Exercise 2-18Exercise 2-18Exercise 2-18Exercise 2-18

Aug 1 Cash 60,000

R. Woodward, Capital 60,000

To record investment by owner

2 Supplies 200

Accounts Payable 200

Purchased supplies on account

Cash increases. It is an asset. Increase assets with debits.Capital increases. Owner’s equity is increased with a

credit.

Supplies, an asset, increases. Increase assets with debits.Accounts Payable increases. It is a liability. Increase

liabilities with a credit

Page 48: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 49

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Exercise 2-5Exercise 2-5Exercise 2-5Exercise 2-5

Aug 4 Building 50,000

Cash 50,000

Purchased building

6 Cash 3,000

Service Revenue 3,000

Performed service

Both of these accounts are assets. Building is increasing. Increase assets with

debits. Cash is decreasing. Decrease

assets with credits.

Cash, an asset, is increasing. Increase assets with debits.

Revenue accounts are increased with credits

Page 49: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 50

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Exercise 2-18Exercise 2-18Exercise 2-18Exercise 2-18

Aug 9 Accounts Payable 100

Cash 100

Paid on account

17 Accounts Receivable 2,100

Service Revenue 2,100

Performed services

Accounts Payable, which is decreasing,

is a liability. Decrease liabilities by debiting them. Decrease the asset, Cash, with a

credit.

Both of these accounts are assets. Building is increasing. Increase assets with

debits. Cash is decreasing. Decrease

assets with credits

Page 50: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 51

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Exercise 2-18Exercise 2-18Exercise 2-18Exercise 2-18

Aug 23 Cash 1,200

Accounts Receivable 1,200

Received payment on account

Both of these accounts are assets. Cash is increasing – debit.

Accounts Receivable is decreasing - credit

Page 51: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 52

GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Exercise 2-18Exercise 2-18Exercise 2-18Exercise 2-18

Aug 31 Salary Expense 1,200

Cash 1,200

Paid salaries

31 Rent Expense 500

Cash 500

Paid rent for the month

Both of these transactions involve

recognizing expenses. Since expenses

decrease owner’s equity, and owner’s equity is decreased with a debit, debit expenses. Cash is decreasing – credit

Page 52: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 53

Exercise 2-19Exercise 2-19Exercise 2-19Exercise 2-19Aug 9 100

Cash

Aug 1 60,000 Aug 4 50,000Aug 6 3,000

Accounts Receivable

Aug 17 2,100Service Revenue

Aug 6 3,000

Bal. 12,400

BuildingAug 4 50, 000

R. Woodward, Capital

Aug 1 60,000

Rent Expense

Salary Expense

Aug 2 200

Supplies

Aug 2 200Accounts Payable

Aug 9 100Bal. 100

Aug 17 2,100

Aug 23 1,200

Aug 23 1,200

Aug 31 1,200Aug 31 500

Bal. 900Bal. 5,100

Aug 31 1,200

Aug 31 500

Take the difference between total debits and total credits to

determine the balance in each account. If

debits are greater than credits, the account has a debit balance

and vice versa

Page 53: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved 54

Woodward Technology Solutions

Trial Balance

August 31, 2008

Cash 12,400

Accounts Receivable 900

Supplies 200

Building 50,000

Accounts Payable 100

R. Hawk, Capital 60,000

Service Revenue 5,100

Salary Expense 1,200

Rent Expense 500

Totals 65,200 65,200

Exercise 2-19Exercise 2-19Exercise 2-19Exercise 2-19

Page 54: Copyright © 2007 Prentice-Hall. All rights reserved 1 Recording Business Transactions Chapter 2.

Copyright © 2007 Prentice-Hall. All rights reserved

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End of Chapter 2End of Chapter 2End of Chapter 2End of Chapter 2


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