FIRST YEAR ACCOUNTING PRINCIPLES AMR YOUSSEF

PART (5)

ACCOUNTING PRINCIPLES
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |2

CONTINUING: R E C O R D I N G P R O C E S S

EX1: "Fofa Company" was formed on May 1, 2018.

The following transactions took place during the first month.
1. Fifi Abdo invested $50,000 cash in the company.
2. Hired two employees to work in the warehouse. They will each be paid a salary of $2,800 per month.
3. Signed a 2-year rental agreement on a warehouse; paid $24,000 cash in advance for the first year.
4. Purchased furniture and equipment costing $30,000. A cash payment of $10,000 was made
immediately; the remainder will be paid in 6 months.
5. Paid $1,800 cash for a one-year insurance policy on the furniture and equipment.
Transactions during the remainder of the month:
6. Purchased basic office supplies for $500 cash.
7. Purchased more office supplies for $1,500 on account.
8. Total revenues earned were $20,000—$8,000 cash and $12,000 on account.
9. Paid $400 to suppliers for accounts payable due.
10. Received $3,000 from customers in payment of accounts receivable.
11. Received utility bills in the amount of $200, to be paid next month.
12. Paid the monthly salaries of the two employees, totalling $5,600.

REQ:
(a) Prepare journal entries to record each of the events listed.
(b) Post the journal entries to T accounts.
(c) Prepare a trial balance as of May 31, 2018.

Date Account Name Ref. Dr. Cr.

May Cash 50,000
#1 Capital 50,000
May
#2 NO ENTRY!
May Prepaid Rent 24,000
#3 Cash 24,000
May Furn. & Equ. 30,000
#4 Cash 10,000
AP 20,000
May Prepaid Insurance 1,800
#5 Cash 1,800
May Supplies 500
#6 Cash 500
May Supplies 1,500
#7 AP 1,500
May Cash 8,000
#8 AR 12,000
Revenue 20,000
May AP 400
#9 Cash 400
May Cash 3,000
#10 AR 3,000
May Utility Expense 200
#11 AP 200
May Salaries Expense 5,600
#12 Cash 5,600
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |3

A- Journalizing:

B- POSTING:
CAPITAL CASH
50,000 50,000
24,000
End Balance 10,000
50,000 1,800
8,000 500
Furniture & Equipment
400
30,000
End Balance 3,000
30,000
5,600
AP End Balance
18,700
20,000
1,500
400 Service Revenue
200 20,000
End Balance
21,300 End Balance
20,000

AR
Supplies
50012,000
1,500 3,000
End Balance
End Balance
2,0009,000

Prepaid
PrepaidRent
Insurance
24,000
1,800
End Balance
End Balance
24,0001,800

Salaries Expense Utilities Expense

5,600 200

End Balance End Balance

5,600 200
 FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |4

C- Trial Balance:
Trial Balance
At May, 31,2018
Account Name Dr. Cr.
Cash 18,700
AR 9,000
Supplies 2,000
Prepaid Insurance 1,800
Prepaid Rent 24,000
Furniture & Equipment 30,000
AP 21,300
Capital 50,000
Service Revenue 20,000
Salaries Expense 5,600
Utilities Expense 200
TOTAL 91,300 91,300

EX2: On Nov 1,2018 "Sofinar" started a service company business with the following transactions during
the month of November:
Nov 01 Sofinar invested $25,000 cash in the company.
Nov 02. Hired two employees with monthly salary $3,000 each.
Nov 15. Provided services on account and billed the customers $14,800.
Nov 18. Received $5,000 in advance for services expected to be provided in December.
Nov 31. Purchased $2,000 office supplies for $500 cash and the rest on Account.

Date Account Name Ref. Dr. Cr.

May Cash 25,000
#1 Capital 25,000
May
#2 NO ENTRY!
May AR 14,800
#3 Revenue 14,800
May Cash 5,000
#4 Unearned Revenue 5,000
May Supplies 2,000
#5 Cash 500
AP 1,500
REQ:
(a) Journalize the transactions provided above.
(b) Post the transactions to the cash account only.

A- Journalizing:
B- POSTING:
CASH
25,000
5,000 500
End Balance
29,500
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |5

EX3: on Dec 31,2018 the Ending Balances of “Kardashian’s Company” as follow:

Cash $30,000 Equipment $50,000
AR 35,000 NP 2,000
AP 15,000 Drawings 2,500
Supplies 10,000 Rent Expense 7,500
Service Revenue 40,000 Capital ????
Unearned Revenue 5,000 Salaries Expense 7,000

REQ: - Prepare The Trial Balance of 2018

Trial Balance
At Dec, 31,2018
Account Name Dr. Cr.
Cash 30,000
AR 35,000
Equipment 50,000
Supplies 10,000
AP 15,000
Unearned Revenue 5,000
NP 2,000
Capital ???
Drawings 2,500
Service Revenue 40,000
Salaries Expense 7,000
Rent Expense 7,500
TOTAL 142,000 62,000

??? = 142,000 - 62,000 = 82,000

EX4: The Following selected entries from " Nicki Minaj Company" General Journal:
Date Account Name Dr. Cr.
Supplies 2,500
#1 AP 2,500
AR 4,000
#3 Revenue 4,000
Cash 3,000
#4 AR 3,000
AP 1,000
#5 Cash 1,000

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

CASH AP Service Revenue

3,000 1,000 1,000 2,500 4,000
End Balance End Balance End Balance
2,000 1,500 4,000

Supplies
2,500
End Balance
2,500
 FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |6

EX5: The T-accounts below summarize the ledger of Simon Company at the end of the first month of
operations.

REQ:
(a) Prepare the complete general journal from which the postings to Cash were made.
(b) Prepare a trial balance at April 30, 2018.

Date Account Name Ref. Dr. Cr.

1/4 Cash 15,000
Capital 15,000
12/4 Cash 900
Service Revenue 900
15/4 Salaries Expense 600
Cash 600
25/4 AP 1,500
Cash 1,500
29/4 Cash 400
AR 400
30/4 Cash 1,000
Unearned Revenue 1,000
(a) – Journalizing cash:

(b) – Determine The Ending Balances First.

Trial Balance
At April, 30,2018
Account Name Dr. Cr.
Cash 15,200
AR 2,800
Supplies 1,800
AP 300
Unearned Revenue 1,000
Capital 15,000
Service Revenue 4,100
Salaries Expense 600
TOTAL 20,400 20,400
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |7

SPECIAL For Posting :

CASE:
4-Coulmn Format!

Charts of Accounts
The chart of accounts is a listing of all accounts & the accounts number used in the
general ledger of a Business.

4-Column Format
Other Form of Posting: Some Business post accounts in other form known as
Standard form of Account.
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |8

EX4: The Following selected entries from " Nicki Minaj Company" General Journal:
Date Account Name Dr. Cr.
Supplies 2,500
#1 AP 2,500
AR 4,000
#3 Revenue 4,000
Cash 3,000
#4 AR 3,000
AP 1,000
#5 Cash 1,000

Date EXPLANATION Ref. Dr. Cr. Balance

1/4 Cash 15,000

Capital 15,000
 FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |9

SPECIAL
TOPIC: Change in Acc. Equation
Remember: THE ACCOUNTING EQUATION

ASSETS = LIABILIITES + OWNER’S

EQUITY
So Any Change in Assets must be equal to the total change in the liabilities & owner’s equity
NEW - OLD = Change

:Change
The Difference Between the value at the end of the period and its value at the beginning of the same
.period

ASSETS = LIAB. + O.E

COURSE EXCERCISE
- Information about AY Company are as follows:

1/1/2018 31/12/2018
Assets = 700,000 Assets = 780,000
Liabilities = 280,000 Liabilities = 240,000

REQ: - Calculate the Change in Owner’s Equity during 2018.

= Change in Assets
Increase 80,000 = 700,000 = 780,000
= Change in Liabilities
Decrease 40,000- = 280,000 = 240,000
= Change in O.E
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e | 10

EX4: The Following is a trial balance of Alex Company at January 31,2018.

Trial Balance
At Jan, 31,2018
Account Name Dr. Cr.
Cash 3,000
AR 2,000
Supplies 600
Equipment 25,800
AP 11,400
Capital 11,600
Service Revenue 9,800
Salaries Expense 1,700
Rent Expense 700
Wages Expense 500
TOTAL 34,300 32

- The Following errors was discovered ...

1. $500 Cash revenue recorded debit to AR and Credit Service Revenue.
2. A payment of accounts payable for $600 was credited to cash and debited to accounts
receivable.
3. A credit to accounts receivable for $650 was posted as $65.
4. A cash purchase of equipment for $693 was journalized as a debit to equipment and a
credit to notes payable. The credit posting was made for $639.
5. A debit posting of $300 for purchase of supplies was credited to supplies.
6. A debit to rent expense for $491 was posted as $419.
7. A debit posting for wages expense for $900 was made twice.
8. A cash purchase of supplies for $700 was journalized and posted as a debit to supplies for
$70 and a credit to cash for $70.