FIRST YEAR ACCOUNTING PRINCIPLES AMR YOUSSEF

PART (4)

ACCOUNTING PRINCIPLES
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CONTINUING: T h e R e c o r d i n g P r o c e s s
COURSE EXCERCISE
Amr Started his new Business “AY Company” on October 2016 ,
During October:
1- Amr Invest 500,000$ Cash in his new Business “AY Company”
2- “AY Company” Purchased Equipment for 20,000$.
3- “AY Company” Purchased Supplies for 10,000$ on Account.
4- “AY Company” Borrowed 15,000$ from “CIB Bank” &
Signed a Note.
5- Amr Withdrew 3,000$ from the Business for his birthday.
6- The Company Paid 7,000$ Rent in Advance.
7- The Company Provide services for 50,000$.
8- The Company Rendered Services to Customers for 17,000$
on Account.
9- Hired a Security for the office to started next month for 4,000$
Salary for Month.
10- Collect Receivables from Customers in Transaction no. 8 .
11- The Company Purchased a Car for 35,000$.
12- The Owner Invest 150,000$ in Business.
13- Paid 40,000$ Salaries to Employees
14- Paid 5,000 to “CIB BANK”.
15- The Company Received 12,000$ for service will be provided
next month.
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16- Paid 3,000$ Utilities, Advertising 2,000$ , Insurance 2,000$.

REQ: - Journalize , Post & Prepare Trial Balance for the Above Transactions for October.

Date Account Name Ref. Dr. Cr.

Cash 500,000
Oct.
Capital 500,000
Equipment 20,000
Oct.
Cash 20,000
Supplies 10,000
Oct.
AP 10,000
Cash 15,000
Oct.
NP 15,000
Drawings 3,000
Oct.
Cash 3,000
Oct. Prepaid Rent 7,000
#6 Cash 7,000
Cash 50,000
Oct.
Revenue 50,000
AR 17,000
Oct.
Revenue 17,000
Oct.
#9 NO ENTRY!
Cash 17,000
Oct.
AR 17,000
Car 35,000
Oct.
Cash 35,000
Cash 150,000
Oct.
Capital 150,000
Salaries Expense 40,000
Oct.
Cash 40,000
NP 5,000
Oct.
Cash 5,000
Oct. Cash 12,000
#10 Unearned Revenue 12,000
Oct. Utilities Expense Cash 3,000
Advertising Exp. 2,000 7,000
Insurance Exp. 2,000
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TOTA
881000 259000
L
A- Journalizing:

#6 Prepaid Expenese:
Payment of cash in Advance that is recorded as an asset because service or benefit will be received in
the future (prepaid telephone, rent , insurance , advertising )

#10 Unearned Revenue:

Receipt of Cash in Advance that is recorded as a liability because
the revenue has not been earned yet.

#9 NO ENTRY!
Hiring an Employee is not a accounting transaction, There is an only agreement between the employer
and employee.

B- POSTING:

CAPITAL CASH
500,000 500,000
150,000 20,000
End Balance 15,000
650,000 3,000
50,000 7,000
Equipment 17,000
35,000
20,000
End Balance 150,000
40,000
20,000
12,000 5,000
AP 7,000
End Balance
10,000 627,000
End Balance
10,000
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AR
Service Revenue
17,000 50,000
17,000
17,000
End Balance End Balance
ZERO 67,000

Advertising
NP Expense
2,000 15,000
5,000
End Balance End Balance
2,000 10,000

Supplies Prepaid Rent

10,000 7,000
End Balance
10,000 End Balance
7,000

Salaries Expense Unearned Revenue

40,000 12,000
End Balance End Balance
40,000 12,000

Utilities Expense Insurance Expense

3,000 2,000

End Balance End Balance

3,000 2,000

Car Drawings
35,000 3,000
End Balance End Balance
35,000 3,000
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C- TRIAL BALANCE
The trial balance is a accounting report that lists the balances in each
of a Business general ledger accounts. (NOT A FINANCIAL STATEMENT)
The trial balance was commonly prepared by the Accountants in order to Discover
whether math errors and/or some posting (T-Account Process) errors were made.
- How to Prepare the Trial Balance?
1- Indicate The Ending Balance of T-Accounts
2- Determine the Nature of Account is Debit or Credit
3- Prepare The Trial Balance table “Report” as follow.
4- you must sort trial balance in order based on Accounting Equation
(Asset,Liabilites,Capital,Drawings,Revenues,Expenses)
5- The two sides Must be Equal in amount.
6- Ending Balance will be Beginning Balance for next period and so on.

- Back to Course Exercise Page 2:

Trial Balance
At Oct, 31,2018
Account Name Dr. Cr.
Cash 627,000
Equipment 20,000
Prepaid Rent 7,000
Supplies 10,000
Car 35,000
AP 10,000
NP 10,000
Unearned Revenue 12,000
Capital 650,000
Drawings 3,000
Service Revenue 67,000
Advertising Expense 2,000
Salaries Expense 40,000
Insurance Expense 3,000
Utilities Expense 2,000

TOTAL 749,000 749,000

FOR EVER DEBIT MUST BE EQUAL
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Bills = on Account
law leya = AR
law 3alya = AP

Unearned revenue= rent , airline ticketes , insurance , adv , mangazine subscriptions ,

customer depostis , school tuition , copoun

Incurred = 3alya AP

Prepaid expense = Telephone , …. , insurance

Revenue in service business = consulting service , engagement service , admission

fees,
FIRST YEAR – ACCOUNTING PRINCIPLES P a g e |8

SPECIAL For The Trial Balance :

CASE:
Trial Balance Errors!

(1) Inexperience Errors.

(2) Undiscovered Errors.

(1) Inexperience Errors

- The Trial balance was commonly prepared by the Accountants in order to Discover
whether math errors and/or some posting (T-Account Process) errors were made.

COURSE EXCERCISE
- An inexperienced bookkeeper in “AY Company” prepared the following trial balance.

Trial Balance
At Dec, 31,2018
Account Name Dr. Cr.
Cash 14,800
Prepaid Insurance 3,500
AP 3,000
Unearned Revenue 2,200
Capital 13,000
Drawings 4,500
Service Revenue 25,600
Salaries Expense 18,600
Rent Expense 2,400
TOTAL 35,600 52,000

REQ: Prepare a correct trial balance, assuming all account balances are normal.

Corrected Trial Balance

At Dec, 31,2018
Account Name Dr. Cr.
Cash 14,800
Prepaid Insurance 3,500
AP 3,000
Unearned Revenue 2,200
Capital 13,000
Drawings 4,500
Service Revenue 25,600
Salaries Expense 18,600
Rent Expense 2,400
TOTAL 43,800 43,800
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(2) Undiscovered Errors

- However, there are many errors may exist even though the trial balance
columns equality , These errors will not be discovered in The Trial Balance.
The Errors that can’t be Discovered By The Trial Balance such as:
1. a transaction is not journalized (omitted) .
2. a journal entry is not posted.
3. a journal entry is posted twice.
4. incorrect account name are used in journalizing or posting.
5. errors are made in recording the amount of a transaction.

COURSE EXCERCISE
- The bookkeeper for "AY Company" made a number of errors in journalizing and
posting, as described below.

1. A credit posting of $400 to Accounts Receivable was omitted.

2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.

3. A collection from a customer on account of $100 was journalized and posted as a debit to Cash
$100 and a credit to Service Revenue $100.

4. A credit posting of $300 to Accounts Payable was made twice.

5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25 and a
credit to Cash $25.

6. A debit of $475 to Advertising Expense was posted as $457.

REQ: For each error:

(a) Indicate whether the trial balance will balance.
(b) If the trial balance will not balance, indicate the amount of the difference.
(c) Indicate the trial balance column that will have the larger total.

consider each error separately. Use the following form,

in which error (1) is given as an example.
Error Balance or Not Difference Larger Column
(1) No 400 Debit

Error Balance or Not Difference Larger Column

(1) No 400 Debit
(2) Yes - -
(3) Yes - -
(4) No 300 Credit
(5) Yes - -
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(6) No 18 Credit

EX1: Prepare a trial balance from the ledger accounts of Badawia Café as of January 31, 2018.
Accounts Payable $ 500 Rent Expense $ 500
Accounts Receivable 2,000 Service Revenue 3,000
Cash 1,000 Supplies 200
Capital 2,200 Wages Expense 1,000
Drawing 1,000

Trial Balance
At Jan, 31,2018
Account Name Dr. Cr.
Cash 1,000
AR 2,000
Supplies 200
AP 500
Capital 2,200
Drawings 1,000
Service Revenue 3,000
Rent Expense 500
Wages Expense 1,000
TOTAL 5,700 5,700

EX4: 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.

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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

EX3: The bookkeeper for Smart Monkey Advertising Service made a number
of errors in journalizing and posting as described below:
1. A debit posting to accounts receivable for $500 was omitted.
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.

REQ: For each error:

(a) Indicate whether the trial balance will balance.
(b) If the trial balance will not balance, indicate the amount of the difference.
(c) Indicate the trial balance column that will have the larger total.
consider each error separately. Use the following form,
in which error (1) is given as an example.

Error Balance or Not Difference Larger Column

(1) No 500 Credit

Error Balance or Not Difference Larger Column

(1) No 500 Credit
(2) Yes - -
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(3) No 585 Debit

(4) No 54 Debit
(5) No 600 Credit
(6) No 72 Credit
(7) No 900 Debit
(8) Yes - -

Quote of the Part:

Our lives are defined by opportunities,
even the ones we miss.
From- The Curious Case of Benjamin Button

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END OF PART 4 –
PART 5 is Questions
Next Lecture: PART 6
Wednesday 18/10: 02:00 or 05:30 PM

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