Concept explainers
(a)
Journal:
Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Companies may use various kinds of journals, but every company has most common form of journal that is, the general journal. Journal makes three significant contributions to the recording process. They are as follows:
- Complete effect of a business transaction disclosed in one place.
- Transactions are recorded in chronological order.
- It helps to prevent or locate errors.
Rules of Debit and Credit
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To indicate: basic type of account, specific account debited and credited, whether it is increased or decreased and normal balance of the specific account for each transaction.
(b)
To journalize: issuance of common stock, equipment (car) purchased in cash, Supplies purchased on account, Service performed on account to customers, paid cash for advertisement, cash received from customer, cash paid to creditors, dividend paid to stockholders.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- The following are the transactions of Spotlighter, Incorporated, for the month of January. Borrowed $3,940 from a local bank on a note due in six months. Received $4,630 cash from investors and issued common stock to them. Purchased $1,000 in equipment, paying $200 cash and promising the rest on a note due in one year. Paid $300 cash for supplies. Bought and received $700 of supplies on account. Required:Prepare journal entries for each transaction.arrow_forwardThe following transactions occur for Badger Biking Company during the month of June: 1. Purchase bicycle inventory for $80,000 on account. 2. Sell inventory costing $40,000 for $65,000 in cash. 3. Provide repair services to customers on account for $50,000. 4. Receive cash of $42,000 from customers in (c) above. 5. Purchase bike repair equipment by signing a note with the bank for $35,000. 6. Pay utilities of $5,000 for the current month. Analyze each transaction and show the effects of each on the accounting equation. Note: Decreases to account classifications should be indicated by a minus sign. Transaction (1) (1) (2) (2) (3) (3) (4) (4) (5) (5) (6) (6) Assets 11 $ 11 11 = $ 50,000 = = 42,000 = $ (42,000) = $ 35,000 = = (5,000) = = II Liabilities $ 35,000 + + + + + + + + + + + Stockholders' Equity $ 50,000 $ (5,000)arrow_forwardGeorge Smyth opened a computer repair business on Apr. 1, 20--. During the first month of operations, the firm had the following transactions. Apr. 1 George Smyth invested $30,000 cash in the business. 2 Paid rent for April, $2,100. 8 Bought equipment for $12,000 and issued a check for $3,000 as a down payment. 12 Performed services for $3,200 in cash, and $1,200 on credit. 19 Paid electric bill, $225. 25 Received $900 on account from credit customers. Required: Record these transactions on page 1 of the general journal. Omit explanations. If an amount box does not require, leave it blank. Page: 1 DATE DESCRIPTION POST.REF. DEBIT CREDIT 1 Apr. 1 Cash 101 fill in the blank f9fb70ff9f95044_2 fill in the blank f9fb70ff9f95044_3 1 2 George Smyth, Capital 311 fill in the blank f9fb70ff9f95044_5 fill in the blank f9fb70ff9f95044_6 2 3 Apr. 2 Rent Expense 521 fill in the blank f9fb70ff9f95044_8 fill in the blank f9fb70ff9f95044_9 3 4 Cash 101…arrow_forward
- I. Journalize the following transactions that occurred for Jane Long's Restaurant in the month of May. Post to the ledgers. 1 Purchased inventory stock for $350 on credit. 2 Restaurant makes sales of $2,000, $1,200 for cash and $800 on account. 3 Paid staff wages $750. 4 Received $660 in connection with customers billed in (2) above. 5 Jane Long withdrew $2,400 from the business. 6 Paid $330 for miscellaneous expenses (telephone, electricity, etc.). 7 Paid $350 to trade creditors. 8 Took up a loan of $4,200 from the bank. 9 Restaurant makes sales of $2,800, $1,500 for cash and $1,300 on account. 10 Purchased furniture costing $3,160 on creditarrow_forwardThe following are the transactions of Spotlighter, Incorporated, for the month of January. a. Borrowed $3.990 from a local bank on a note due in six months. b. Received $4,680 cash from investors and issued common stock to them. C. Purchased $1,100 in equipment, paying $250 cash and promising the rest on a note due in one year. d. Paid $350 cash for supplies. e. Bought and received $750 of supplies on account. Required: Post the effects to the appropriate T-accounts and determine ending account balances. Show a beginning balance of zero.arrow_forwardPrepare the following journal entry, all transactions that occurred in January: The Corporation purchased a Delivery Van for customer deliveries. The Delivery Van cost $21,400. A down payment of cash in the amount of $5,000 was paid to the Car Dealership, and a promissory note was signed for the remaining amount owed.arrow_forward
- The transactions completed by Revere Courier Company during December, the first month of the fiscal year, were as follows: Dec. 1. Issued Check No. 610 for December rent, $4,200. Dec. 2. Issued Invoice No. 940 to Clifford Co., $1,740 Dec. 3. Received check for $4,800 from Ryan Co. in payment of account. Dec. 5. Purchased a vehicle on account from Platinum Motors, $37,300. Dec. 6. Purchased office equipment on account from Austin Computer Co., $4,500. Dec. 6. Issued Invoice No. 941 to Ernesto Co., $3,870. Dec. 9. Issued Check No. 611 for fuel expense, $600. Dec. 10. Received check from Sing Co. in payment of $4,040 invoice. Dec. 10. Issued Check No. 612 for $330 to Office To Go Inc. in payment of invoice. Dec. 10. Issued Invoice No. 942 to Joy Co., $1,970. Dec. 11. Issued Check No. 613 for $3,090 to Essential Supply Co. in payment of account. Dec. 11. Issued Check No. 614 for $500 to Porter Co. in payment of account. Dec. 12. Received…arrow_forwardJournalize the following business transactions in general journal form. Identify each transaction by number. 1. The company issues stock in exchange for $40,000 cash. 2. Purchased $400 of supplies on credit. 3. Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000, note payable. 4. Real estate commissions billed to clients amount to $4,000. Paid $700 in cash for the current month's rent. 6. Paid $200 cash on account for supplies purchased in transaction 2. 7. Received a bill for $600 for advertising for the current month. 8. Paid $2,200 cash for office salaries and wages. 9. The company paid dividends of $1,500. 10. Received a check for $3,000 from a client in payment on account for commissions billed in transaction 4. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "Ne for the account titles and enter O for the amounts.) 5.arrow_forwardThe following are the transactions of Spotlighter, Incorporated, for the month of January. a. Borrowed $4,390 from a local bank on a note due in six months. b. Received $5,080 cash from investors and issued common stock to them. c. Purchased $1,900 in equipment, paying $650 cash and promising the rest on a note due in one year. d. Paid $750 cash for supplies. e. Bought and received $1,150 of supplies on account. Required: Post the effects to the appropriate T-accounts and determine ending account balances. Show a beginni Debit Beginning Balance Ending Balance Debit F Cash Equipment Credit Credit Debit Beginning Balance Ending Balance Debit Supplies Accounts Payablearrow_forward
- Money Lenders experienced the following accounting events in its first year of operation. 1. The company was started on January 1, Year 1 when it received $50,000 in cash for the sale of common stock. 2. Paid $4,200 cash for operating expenses. 3. Recognized $7,300 of cash service revenue. 4. Loaned $10,000 cash to Needy Company on July 1, Year 1. Needy Company signed a one- year note and agreed to pay 5% interest. 5. Money Lenders recognized accrued interest receivable at December 31, Year 1. Accounting events affecting Year 2 were as follows: 1. On July 1, Year 2 Money Lenders recognized the accrued interest receivable on the note re- ceivable. 2. Collect cash for accrued interest on the note receivable. On July 1, Year 2, Money Lenders collected the principal balance of the note. 4. Recognized $9,500 of cash service revenue. 5. Paid $6,400 cash for operating expenses. Required a. Record the events for Year 1 and Year 2 in T-accounts. b. Prepare in income statement for Year 1 and…arrow_forwardCheck my The following transactions took place at the Cook Employment Agency during November 20X1. DATE TRANSACTIONS 5 Performed services for Job Search, Inc., for $40,000; received $19,000 in cash and the client promised to pay the balance in 60 days. 18 Purchased a graphing calculator for $425 and some supplies for $575 from office Supply; issued Check 1008 for the total. 23 Received Invoice 1602 for $2,100 from Automotive Technicians Repair for repairs to the firm's automobile; issued Check 1009 for half the amount and arranged, to pay the other half in 30 days. Nov. Prepare journal entries for the above transactions. View transaction listarrow_forwardNew Wave Images is a graphics design firm that prepares its financial statements using a calendar year. Manny Kinn, the company treasurer and vice president of finance, has prepared a classified balance sheet as of December 31. In January, this balance sheet will be submitted along with an application for a loan from First Peoples Community Bank. An excerpt from the balance sheet follows: $ 25,000 Cash Accounts receivable 85,000 ...... Total assets $250,000 The accounts receivable balance includes a $56,000 loan to Tom Morrow, the company president. Tom borrowed the money from New Wave 18 months earlier for a down pay- ment on a new home. Tom has orally assured Manny that he will pay off the loan within the next year. Because Tom is the company president, Manny treats the amount due as part of its normal accounts receivable. In addition, Manny knows that the bank will con- sider a large balance in accounts receivable more favorably than a large personal loan to a single individual.…arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College