Principle of Accounting

Chapter 2 Name Thomas Termote

In- class Exercise
FA 21

1)An account is a record of increases and decreases in a specific asset, liability, equity,
revenue, or expense. The general ledger is a record of all accounts used by the
company.

2) Asset accounts are resources owned or controlled by a company and that have
expected future benefits.

3) Liabilities are claims (by creditors) against assets, which means they are obligations
to transfer assets or provide products or services to other entities.

4) The owner’s claim on a company’s assets is called equity accounts.

5)Revenues and owner’s contributions increases equity.

6) Expenses and owner’s withdrawals decreases equity.

7)The general ledger collection of all accounts and their balances for an accounting
system.

FAST FORWARD COMPANY

1) The owner invests $30,000 to start a company called Fast-forward.
Analyze: -- Cash Asset increasing Capital increasing
Record Journal Entry:

Dr Cr
     
 Cash  30,000  
  Capital    30,000

1
      

Post to T-accounts.

Analyze: -- Cash Asset Decreasing Office supplies Asset increasing

RECORD Journal Entry:

Dr Cr
     
 Cash    2,500
  Office supplies  2,500  

     

Post to T-accounts.
.

3) Fast-forward purchases equipment paying $26,000 cash.

Analyze:-- Equipment Asset Increasing Cash decreasing

Record Journal Entry:

Dr Cr
     
 Equipment  26,000  
  Cash    26,000

     

Post to T-accounts.

2
4) Fast-forward purchases $7,100 of office supplies on account.
Analyze:-- Office Supplies Asset Increasing AP liability increasing
Record Journal Entry:

Dr Cr
     
 Office supplies  7,100  
  Account payable    7,100

     

Post to T-accounts.
.

5) FastForward provided consulting services and collected $4,200 cash.

Analyze:-- Revenue Increasing Cash Increasing
Record Journal Entry:

Dr Cr
     
 Cash  4,200  
  Revenue    4,200

     

Post it to T-accounts.
6) FastForward provided pays $1,000 cash for December rent.
Analyze:-- Cash Decreasing Expenses Rent Increasing

3
Record Journal Entry:

Dr Cr
     
 Rent expense  1000  
  Cash    1000

     

Post to T-accounts.
.

7)FastForward provided pays $700 cash for employee salaries

Analyze:-- Salary Expense Increasing Cash decreasing
Record Journal Entry:

Dr Cr
     
 Salaries Expense  700  
  Cash    700

     

Post to T-accounts.

8) FastForward provided consulting services of $1,600 and rents its test facilities for
$300. The customer is billed $1,900 for services.
Analyze:-- Account receivable (Asset) Increasing Rent revenue / Consulting revenue
increasing

4
Record Journal Entry:

Dr Cr
     
 Account receivable  1900  
  Rent revenue    300

  Consulting revenue    1600

Post to T-accounts.
.

9)FastForward receives $1,900 cash from the client billed in transaction 8.

Analyze:-- Cash Increases AR decreases
Record Journal Entry:

Dr Cr
     
 Cash  1900  
  Account Receivable    1900

     

Post to T-accounts.

10) FastForward pays $900 cash toward the payable in transaction 4

Analyze:-- Cash decreasing AP decreasing

5
Record Journal Entry:

Dr Cr
     
AP  900  
Cash    900

     

Post to T-accounts.

11)Chas Taylor withdraws $200 cash from FastForward for personal use.
Analyze:--
Record Journal Entry:

Dr Cr
     
 Withdrawls  200  
  Cash    200

     

Post to T-accounts.

12)FastForward receives $3,000 cash in advance of providing consulting services to a

customer.
Analyze:-- Cash increasing unearned Revenue (liability)

Record Journal Entry:

Dr Cr
     

6
  Cash  3000  
  Unearned Revenue    3000

     

Post to T-accounts.
.
.
13)FastForward pays $2,400 cash for a 24-month insurance policy.
Analyze:-- Cash decreasing Prepaid insurance Asset increasing
Record Journal Entry:

Dr Cr
     
 Prepaid insurance  2400  
  Cash  2400

     

Post to T-accounts.
.
14) FastForward pays $120 cash for supplies
Analyze:--

Record Journal Entry:

Dr Cr
     
Supplies  120  
Cash    120

     

Post to T-accounts.

7
15) FastForward pays $305 cash for December utilities expense.
Analyze:--
Record Journal Entry:

Dr Cr
     
 Utilities Espenses  305  
  Cash    305

     

Post to T-accounts.
..
16) FastForward provided pays $700 cash for employee salaries
Analyze:--
Record Journal Entry:

Dr Cr
     
 Salaries expenses  700  
  Cash    700

     

Post to T-accounts.