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Accounting Principles Tutorial Guide

Principle of accounting

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54 views4 pages

Accounting Principles Tutorial Guide

Principle of accounting

Uploaded by

a204447
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

EPPD1033 PRINCIPLES OF ACCOUNTING

TUTORIAL 2

BE 161
For each of the following accounts indicate the effect of a debit or a credit on the account and
the normal balance. Increase (+), Decrease (–).
Debit_ _Credit_ Normal
Balance
1. Salaries and wages expense. ________ ________ ________
2. Accounts receivable. ________ ________ ________
3. Service revenue. ________ ________ ________
4. Owner’s Capital. ________ ________ ________
5. Owner’s Drawings. ________ ________ ________

BE 162
For each of the following transactions of Neon Garden, identify the account to be debited and
the account to be credited.
1. Purchased 18-month insurance policy for cash.
2. Paid weekly payroll.
3. Purchased supplies on account.
4. Received utility bill to be paid at later date.

BE 163
Journalize the following business transactions in general journal form. Identify each transaction
by number. You may omit explanations of the transaction.
1. Andrew Bird invested $30,000 cash to start an appliance repair business.
2. Hired an employee to be paid $400 per week, starting tomorrow.
3. Paid two years’ rent in advance, $7,440.
4. Paid the worker’s weekly wage.
5. Recorded revenue earned and received for the week, $1,900.

BE 165
Journalize the following transactions for Xiu Xiu Company for June 2012, the company’s first
month of operations. You may omit explanations for the transactions.
1. Purchased equipment on account for $7,000.
2. Billed customers $5,000 for services performed.
3. Made payment of $2,300 on account for equipment purchased earlier in month.
4. Collected $2,900 on customer accounts.
BE 167
The transactions of the Liberty Belle Store are recorded in the general journal below. You are to
post the journal entries to T-accounts.

General Journal
_____________________________________________________________________________
Date Account Titles Debit Credit
_____________________________________________________________________________
2012
Aug. 5 Accounts Receivable 3,400
Service Revenue 3,400

10 Cash 3,000
Service Revenue 3,000

19 Rent Expense 1,100


Cash 1,100

25 Cash 1,400
Accounts Receivable 1,400

Ex. 171
Under a double-entry system, show how the entry in each statement is entered in the ledger by
using debit or credit to indicate the increase or decrease in the affected account.

Debit or Credit

1. An increase in Salaries and Wages Expense. ___________________

2. A decrease in Accounts Payable. ___________________

3. An increase in Prepaid Insurance. ___________________

4. An increase in Owner's Capital. ___________________

5. A decrease in Office Supplies. ___________________

6. An increase in Owner's Drawings. ___________________

7. An increase in Service Revenue. ___________________

8. A decrease in Accounts Receivable. ___________________

9. An increase in Rent Expense. ___________________

10. A decrease in Store Equipment. ___________________


Ex. 179
Journalize the following business transactions in general journal form. Identify each transaction
by number. You may omit explanations of the transactions.
1. The owner, Athena Lu, invests $35,000 in cash in starting a real estate office operating as
a sole proprietorship.
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.
5. 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. Lu withdrew $1,200 from the business for living expenses.
10. Received a check for $3,000 from a client in payment on account for commissions billed in
transaction 4.

Ex. 181
Transactions for Tom Petty Company for the month of October are presented below. Journalize
each transaction and identify each transaction by number. You may omit journal explanations.
1. Invested $40,000 cash in the business.
2. Purchased land costing $28,000 for cash.
3. Purchased equipment costing $12,000 for $3,000 cash and the remainder on credit.
4. Purchased supplies on account for $800.
5. Paid $1,000 for a one-year insurance policy.
6. Received $3,000 cash for services performed.
7. Received $4,000 for services previously performed on account.
8. Paid wages to employees for $2,500.
9. Petty withdrew $1,000 cash from the business.

Ex. 187
Post the following transactions to T-accounts and determine each account's ending balance.

1. Supplies............................................................................................ 2,500
Accounts Payable.................................................................... 2,500

2. Accounts Receivable........................................................................ 4,000


Service Revenue..................................................................... 4,000

3. Cash ................................................................................................. 3,000


Accounts Receivable............................................................... 3,000

4. Accounts Payable............................................................................. 1,000


Cash........................................................................................ 1,000
Ex. 190
L. Phair and Associates is a financial planning service. The account balances at December 31,
2012 taken from ledgers are shown by the following alphabetical list:
Accounts Payable $ 5,000
Accounts Receivable 19,000
Automobiles 27,500
Buildings 100,000
Cash 11,700
Computer 22,000
Computer Software 4,200
Land 42,000
Owner’s Capital 152,900
Notes Payable 95,000
Notes Receivable 8,100
Equipment 15,400
Supplies 800
Technical Library 2,200

Instructions
Prepare a trial balance with the accounts arranged in financial statement order.

Common questions

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The typical journal entry for recording revenue billed to clients involves debiting accounts receivable to acknowledge an asset of expected cash inflow and crediting service revenue to increase revenue. This impacts financial statements by raising both total revenues and expected receivables, contributing to the income and asset section, respectively .

Investing cash into a business increases the owner's capital account through a credit and also increases the cash account through a debit. This represents an owner's investment into the business, increasing both the total assets and the owner's equity .

When services are performed on account, accounts receivable is debited to increase assets, and service revenue is credited to increase owner's equity. This reflects an increase in expected future cash inflows due to the services performed .

A credit to the owner's drawings account reduces the owner's equity. Owner's drawings represent withdrawals of cash or other assets from the business for personal use, which decreases the total invested capital and therefore owner’s equity .

A debit increases the 'Salaries and wages expense' account and it typically has a normal debit balance. This is because expenses are increased with debits in accounting .

Receiving a utility bill to be paid at a later date affects the accounts by debiting utility expense (increasing expenses) and crediting accounts payable (increasing liabilities). It signifies an incurred expense and an obligation to make a future cash outflow, reflecting the company's liability for this obligation .

Paying wages results in a debit to the wages expense account, which increases expenses, and a credit to the cash account, indicating an outflow of cash. This impacts financial health by reducing net income due to increased expenses and decreasing cash resources. These changes must be managed effectively to maintain liquidity and profitability .

A decrease in accounts payable is recorded as a debit. In double-entry accounting, liabilities such as accounts payable decrease with debits because debits decrease liability and equity accounts .

Paying for a long-term insurance policy is recorded initially as a debit to a prepaid insurance asset account and a credit to cash, reflecting a future benefit that lasts beyond the current accounting period. Conversely, a short-term expense is immediately expensed, credited to cash and debited to an expense account, reflecting a benefit that is consumed within the current period .

The purchase of equipment on account should be recorded by debiting the equipment account to increase assets and crediting accounts payable to increase liabilities. This transaction reflects an increase in company assets while creating an obligation to pay in the future, impacting cash flow as an outflow when the liability is settled .

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