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Accounting Chapter 2: Account
Accounting Chapter 2: Account
Chapter 2
Account
Example of an account
Dr Cr
Dr = Cr
1- Assets
Increase in assets debit
Decrease in assets credit
2- Liabilities
Decrease in Liabilities debit
Decrease in Liabilities credit
3- Owner's equity (capital)
Mr: Kareem
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Accounting … Chapter 2
Decrease in capital debit
Increase in capital credit
4- Revenues
Decrease in Revenues debit
Increase in Revenues credit
5- Expenses:
Increase in Expenses debit
Decrease in Expenses credit
6- Withdrawal, (drawings):
Increase in Withdrawal debit
Decrease in Withdrawal credit
Normal balance:
Note
Normal balance of assets is debit
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Accounting … Chapter 2
Dr Cr Dr Cr Dr Cr
+ - - + - +
Dr Cr Dr Cr Dr Cr
- + + - + -
Ex:
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Accounting … Chapter 2
Book of original entry, it is used to record transaction in order and
helping to prevent or locate errors because the debit and credit amount
can be easily compared.
Example
Given the following information about matrix company :-
March 1The owner invested $ 15,000 cash to start the business.
March 3 Purchased supplies from B Company for $ 1,600 cash.
March 5 Purchased computer equipment for $ 7,000 cash.
March 8 Purchased supplies of $ 400 and equipment of $ 700 on
account from B Company.
March 12 Received $ 1,200 cash from customers for programming
services.
March 14 made an advertising of $ 250 in the daily news on account.
March 17 provided a programming services of $ 3,500 received cash
of $ 1,500 and $2,000 on credit.
March 22 Paid rent and employees salaries of $ 800, $ 900 in
accordance.
March 23 paid a bill of $ 250 for advertising to daily news.
March 25 Received $ 600 from customers for services on account.
March 29 with drew $ 1,300 cash from the company for personal use.
Required :-
Prepare Journal entries to record the above transactions (Journalize
it in the general Journal)
Solve:
Mr: Kareem
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Accounting … Chapter 2
Data Account titles Dr Cr
March 1 Cash 15,000
15,000
capital
March 3 supplies 1,600
Cash 1,600
March 5 equipment 7,000
Cash 7,000
March 8 supplies 400
equipment 700
1,100
account
payable
March 12 Cash 1,200
Service 1,200
revenue
March 14 Advertising expense 250
account 250
payable
March 17 Cash 1,500
Account receivable 2,000
3,500
Service
revenue
March 22 rent expense 800
salaries expense 900
1,700
cash
March 23 account payable 250
250
cash
March 25 Cash 600
Account 600
receivable
March 29 Withdrawals 1,300
1,300
cash
Mr: Kareem
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Accounting … Chapter 2
equipment
supplies Mar. 5 7,000
Mar. 3 1,600 Mar. 8 700
Mar. 8 400 End bal. $ 7,700
End bal. $2,000
A/P
Service revenue Mar. 23 Mar. 8 1,100
Mar. 12 1,200 250 Mar. 14 250
Mar. 17 3,500
End bal. $ 1,100
End bal. $ 4,700
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Accounting … Chapter 2
A/R Rent expense
Mar. 17 2,000 Mar. 25 600 Mar. 22 800
End bal. $ End bal. End bal. $ 1100
1,400 $800
Advertising expense
Account titles Dr Cr
Cash 6,450
Supplies 2,000
Equipment 7,700
A/R 1,400
A/P 1,100
Capital 1,500
Withdrawals 1,300
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Accounting … Chapter 2
Services revenue 4,700
Advertising expense 250
Rent expense 800
Salaries expense 900
Totals $20,800 $20,800
Ex:
Given the following information about Mena Company in August:
August 1 Mena invested 12,750 cash in the business.
August 3 purchased office supplies for 375 cash.
August 7 purchased 7,050 of office equipment on credit.
August 9 received 1,500 cash as fees for services provided to
customers.
August 12 paid 7,050 cash to settle the payable for the office
equipment purchased in transaction August 7
August 15 billed customers 2,700 as fees for services provides.
August 20 paid the monthly rent with 525 cash.
August 24 collected 1,125 cash toward the account receivable
created in transaction August 15.
August 29 Mena withdrew 1,000 cash for personal use.
Required:
1- Journalize the above transaction.
2- Post to ledger account.
3- Prepare the trial balance.
4- Prepare all financial statement.
Mr: Kareem
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Accounting … Chapter 2
Solve
1- General Journal:
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Accounting … Chapter 2
Aug. 24 1,125 Aug. 29 1,000 Supplies
End bal. $ 6,425 Aug. 3 375
End bal. $ 375
Equipment A/R
Aug. 7 7,050 Aug. 15 2,700 Aug. 24 1,125
End bal. $ 7,050 End bal. $ 1,575
A/P Capital
Aug. 12 7,050 Aug. 7 7,050 Aug. 1 12,750
End bal -0- End bal. $ 12,750
Rent expense
Aug. 20 525
End bal $ 525
3- Trail balance
Account titles Dr Cr
Cash 6,450
Account receivable 1,575
Office supplies 375
Office Equipment 7,050
Account payable 0
Capital 1,750
Mr: Kareem
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Accounting … Chapter 2
Withdrawals 1,000
Services revenue 4,200
rent expense 525
Total 16,950 16,950
4- Income statement
Revenues
Services revenue 4,200
(-) expense
525
Rent expense
Net income 3,675
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Accounting … Chapter 2
= ending cash balance $ 6425
Balance sheet
Assets : Liabilities : -0-
Cash 6,425 Owner's equity :
Account receivable 1,575 Capital $15,425
Office supplies 375
Office equipment 7,050
Total Assets $ 15,425 total liabilities and equity $15,425
Mr: Kareem
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