Professional Documents
Culture Documents
Same side
decreased).
2. Apply the rules of double entry
Apply the rules of double-entry accounting using T
Step 2
accounts to show how the transaction affects the
accounting equation.
3. Record the entry
Show the transaction in journal form.
Step 3
Dr. Cr.
Step 3 July 2 Administration expenses 1,600
Record Cash 1,600
Purchases
Step 3
Dr. Cr.
July 3 Art Equipment 4,200
Record Cash 4,200
Purchases
Step 1
No entry because transaction has not occurred
Analyze
Step 2
Apply rules
Step 3
Record
Purchases
Increase in assets
Step 1
Decrease in assets
Analyze
Increase in liabilities
Dr. Cr.
Step 3 July 9 Accounts Payable 1,000
Record Cash 1,000
Buying transaction
BUY
Product costs
Expenses
Selling expenses
Administration expenses
Increase in Assets
Decrease in Cash or
Assets
Increase in liabilities (Trade Payables)
BUY
Increase in expenses
Expenses
Decrease in Cash or
Increase in liabilities (Trade Payables)
Payment transaction
Payment
Decrease in liabilities: Trade Payables,
Payable to employees,…..
Decrease Cash
Decrease in Cash in hand/cash in bank
Selling transaction
Selling
transaction
Increase in Costs of goods sold
Costs of goods Decrease in goods/inventories
sold
Increase in expenses
Decrease in Cash or
Selling expenses
Increase in liabilities (Trade Payables)
Equity transaction
Increase in Equity
+ Equity Increase in Cash, asset
Equity
Wage
On 25 August, the owner takes £50 cash out of the business for his own use
adjusted
account
PART 2. BALANCING-OFF ACCOUNTS AND TRIAL
BALANCE
Closing balance = Opening balance + total increasing - total decreasing
CLOSING BALANCE
The Trial Balance
is the third phase of the accounting cycle. Before processing for further
books of accounts.
Trial Balance
……
…..
Total A A B B C C
RECORDING BASIC ECONOMIC TRANSACTIONS
Buying
Selling
Payment
Equity
Wage
Cookie Lapp starts her new business as a corporation named Cookie Lapp
Travel Design, Inc. (The Inc, in the company name abbreviates
Incorporated, which lets people know the business is a corporation)
Requirements:
3. Prepare the trial balance of Cookie Lapp Travel Design, Inc. at April
30, 20xx
1- Cookie Lapp Travel Design received $30,000 cash from Lapp the
stockholder.
4- Lapp collected cash of $5,500 for service revenue that she earned by
providing travel services for clients.
5- Lapp performs service for clients and lets then pay later. She earned
$3,000 of service revenue or account.
Date Accounts and Explanation Debit Credit
1 Apr. 1 Cash 500
Owner’s Equity 500
Issued Stock.
2 Land 20,000
Cash 20,000
Paid Cash for Land.
3 Office supplies 500
Accounts Payable 500
Performed service and receive cash.
4 Cash 5,500
Service Revenue 5,500
Performed service and receive cash.
5 Accounts Receivable 3,000
Service Revenue 3,000
Performed service on account.
6- Lapp paid the following cash expenses: Rent expense on a computer,
$600; Office rent, $1,100; Employee salary, $1,200; and Utilities expense,
$400.
10- Lapp sells a parcel of land owned by the travel agency. The sale price,
$9,000, equals her cost.
11- Lapp received a telephone bill for $100 and will pay this expense next
month.
---------------------
Rent Expense, Computer 600
6
Rent Expense, office 1,000
Cash 3,200