Concept explainers
1.
Journalize the given transaction and identify the number of postings made in the Cash account.
1.
Explanation of Solution
Debit: A debit, is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.
Credit: A credit, is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
- Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.
Pass the journal entries for the given transactions:
General Journal | Page - 1 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
June 1 | Cash | 101 | $40,000 | |
JD Capital | 301 | $40,000 | ||
(To record the receipt of capital) | ||||
June 2 | Rent expense | 514 | $2,000 | |
Cash | 101 | $2,000 | ||
(To record the payment of rent, Check 201) |
Table (1)
General Journal | Page - 2 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
June 3 | Office Furniture | 141 | $12,000 | |
Cash | 101 | $2,000 | ||
Accounts payable | 202 | $10,000 | ||
(To record the purchase of office furniture on cash, Check 202, and on account Invoice 5103) | ||||
June 4 | Supplies | 121 | $1,700 | |
Cash | 101 | $1,700 | ||
(To record the purchase of supplies for cash, Check 203) | ||||
June 6 | Cash | 101 | $7,000 | |
Fees income | 401 | $7,000 | ||
(To record the receipt of fees) | ||||
June 7 | Advertising expense | 511 | $3,000 | |
Cash | 101 | $3,000 | ||
(To record the payment of advertising expense, Check 204) | ||||
June 8 | Recording Equipment | 151 | $15,000 | |
Cash | 101 | $5,000 | ||
Accounts payable | 202 | $10,000 | ||
(To record the purchase of Equipment on cash, Check 205; and on account Invoice 2122) | ||||
June 10 | Accounts receivable | 111 | $5,500 | |
Fees income | 401 | $5,500 | ||
(To record the service provided on account) | ||||
June 11 | Accounts payable | 202 | $3,000 | |
Cash | 101 | $3,000 | ||
(To record the payment for office supplies, Invoice 5103 by Check 206) |
Table (2)
General Journal | Page - 3 | |||
Date | Description | Post | Debit | Credit |
2019 | ||||
June 12 | Cash | 101 | $10,000 | |
Fees income | 401 | $10,000 | ||
(To record the receipt of fees) | ||||
June 15 | Salaries expense | 517 | $6,200 | |
Cash | 101 | $6,200 | ||
(To record the payment of salaries, Checks 207) | ||||
June 18 | Cash | 101 | $4,000 | |
Accounts receivable | 111 | $4,000 | ||
(To record the receipt of cash from the credit clients) | ||||
June 20 | Accounts payable | 202 | $6,000 | |
Cash | 101 | $6,000 | ||
(To record the payment for office supplies, Invoice 2122 by Check 208) | ||||
June 25 | Telephone expense | 520 | $375 | |
Cash | 101 | $375 | ||
(To record the payment of telephone bill, Check 209) | ||||
June 27 | Utilities expense | 523 | $980 | |
Cash | 101 | $980 | ||
(To record the payment of utility bill, Check 210) | ||||
June 27 | JD, Drawing | 302 | $5,000 | |
Cash | 101 | $5,000 | ||
(To record the drawings made by the owner, Check 211) | ||||
June 30 | Salaries expense | 517 | $6,200 | |
Cash | 101 | $6,200 | ||
(To record the payment of salaries, Checks 212) |
Table (3)
The number of postings made in the Cash Account is 16.
2.
2.
Explanation of Solution
General ledger: General ledger is a record of all accounts of assets, liabilities, and
Post the journal entries in the General Ledger:
GENERAL LEDGER | ||||||
ACCOUNT: Cash | Account No.: | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 1 | J1 | $ 40,000 | $ 40,000 | |||
June 2 | J1 | $ 2,000 | $ 38,000 | |||
June 3 | J2 | $ 2,000 | $ 36,000 | |||
June 4 | J2 | $ 1,700 | $ 34,300 | |||
June 6 | J2 | $ 7,000 | $ 41,300 | |||
June 7 | J2 | $ 3,000 | $ 38,300 | |||
June 8 | J2 | $ 5,000 | $ 33,300 | |||
June 11 | J2 | $ 3,000 | $ 30,300 | |||
June 12 | J3 | $ 10,000 | $ 40,300 | |||
June 15 | J3 | $ 6,200 | $ 34,100 | |||
June 18 | J3 | $ 4,000 | $ 38,100 | |||
June 20 | J3 | $ 6,000 | $ 32,100 | |||
June 25 | J3 | $ 375 | $ 31,725 | |||
June 27 | J3 | $ 980 | $ 30,745 | |||
June 28 | J3 | $ 5,000 | $ 25,745 | |||
June 30 | J3 | $ 6,200 | $ 19,545 |
Table (4)
GENERAL LEDGER | ||||||
ACCOUNT: Accounts receivable | Account No.: 111 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 10 | J2 | $ 5,500 | $ 5,500 | |||
June 18 | J3 | $ 4,000 | $ 1,500 | |||
ACCOUNT: Supplies | Account No.: 121 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 4 | J2 | $ 1,700 | $ 1,700 | |||
ACCOUNT: Office Furniture | Account No.: 141 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 3 | J2 | $ 12,000 | $ 12,000 | |||
ACCOUNT: Equipment | Account No.: 151 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 8 | J2 | $ 15,000 | $ 15,000 | |||
ACCOUNT: Accounts payable | Account No.: 202 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 3 | J2 | $ 10,000 | $ 10,000 | |||
June 8 | J2 | $ 10,000 | $ 20,000 | |||
June 11 | J2 | $ 3,000 | $ 17,000 | |||
June 20 | J3 | $ 6,000 | $ 11,000 | |||
ACCOUNT: JD Capital | Account No.: 301 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 1 | J1 | $ 40,000 | $ 40,000 |
Table (5)
GENERAL LEDGER | ||||||
ACCOUNT: JD Drawings | Account No.: 302 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 28 | J3 | $ 5,000 | $ 5,000 | |||
ACCOUNT: Fees Income | Account No.: 401 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 6 | J2 | $ 7,000 | $ 7,000 | |||
June 10 | J2 | $ 5,500 | $ 12,500 | |||
June 12 | J2 | $ 10,000 | $ 22,500 | |||
ACCOUNT: Advertising Expense | Account No.: 511 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 7 | J2 | $ 3,000 | $ 3,000 | |||
ACCOUNT: Rent Expense | Account No.: 514 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 1 | J1 | $ 2,000 | $ 2,000 | |||
ACCOUNT: Salaries Expense | Account No.: 517 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 15 | J3 | $ 6,200 | $ 6,200 | |||
June 30 | J3 | $ 6,200 | $ 6,200 | |||
ACCOUNT: Telephone Expense | Account No.: 520 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 25 | J3 | $ 375 | $ 375 |
Table (6)
GENERAL LEDGER | ||||||
ACCOUNT: Utilities Expense | Account No.: 523 | |||||
Date | Description | Post. Ref. | Debit | Credit | Balance | |
Debit | Credit | |||||
2019 | ||||||
June 25 | J3 | $ 980 | $ 980 |
Table (7)
3.
Draft the
3.
Explanation of Solution
Trial balance: Trial balance is a summary of all the asset, liability, and equity accounts and their balances.
Company LCA | ||
Trial Balance | ||
Month Ended June 30, 2019 | ||
Account Name | Debit | Credit |
Cash | $ 19,545 | |
Accounts Receivable | $ 1,500 | |
Supplies | $ 1,700 | |
Office Furniture | $ 12,000 | |
Recording Equipment | $ 15,000 | |
Accounts Payable | $ 11,000 | |
JD, Capital | $ 40,000 | |
JD, Drawing | $ 5,000 | |
Fees Income | $ 22,500 | |
Advertising Expenses | $ 3,000 | |
Rent Expense | $ 2,000 | |
Salaries Expense | $ 12,400 | |
Telephone Expense | $ 375 | |
Utilities Expense | $ 980 | |
Total | $ 73,500 | $ 73,500 |
Table (8)
4.
Prepare Income Statement for Company LCA.
4.
Explanation of Solution
Income statement:
Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.
Company LCA | ||
Income Statement | ||
Month Ended June 30, 2019 | ||
Particulars | Amount ($) | Amount ($) |
Revenues | ||
Fees Income | $ 22,500 | |
Expenses | ||
Advertising Expenses | $ 3,000 | |
Rent Expense | $ 2,000 | |
Salaries Expense | $ 12,400 | |
Telephone Expense | $ 375 | |
Utilities Expense | $ 980 | |
Total expenses | $ 18,755 | |
Net income | $ 3,745 |
Table (9)
5.
Prepare the Statement of Owner's equity for Company LCA.
5.
Explanation of Solution
Statement of owner's’ equity:
This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.
Company LCA | ||
Statement of Owner's Equity | ||
Month Ended June 30, 2019 | ||
Particulars | Amount ($) | Amount ($) |
JD Capital, June 1, 2019 | $ 40,000 | |
Net income for June | $ 3,745 | |
Deduct - Withdrawals | $ 5,000 | |
Decrease in Capital | ($ 1,255) | |
JD Capital, June 30, 2019 | $ 38,745 |
Table (10)
6.
Prepare the Balance sheet for Company LCA.
6.
Explanation of Solution
Balance Sheet:
Balance Sheet summarizes the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business
Company LCA | |||
Balance sheet | |||
As on June 30, 2019 | |||
Particulars | Amount | Particulars | Amount |
Assets | Liabilities | ||
Cash | $ 19,545 | Accounts payable | $ 11,000 |
Accounts Receivable | $ 1,500 | Owner's equity | |
Supplies | $ 1,700 | JD Capital | $ 38,745 |
Office Furniture | $ 12,000 | ||
Recording Equipment | $ 15,000 | ||
Total assets | $ 49,745 | Total liabilities and owner's equity | $ 49,745 |
Table (11)
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