Professional Documents
Culture Documents
CH 02
CH 02
Analyzing Transactions
Assets
Assets are
are Liabilities
Liabilities are
are debts
debts
resources
resources owned
owned owed
owed toto outsiders
outsiders
by
by the
the business.
business. (creditors).
(creditors).
Cash Accounts
Supplies payable
Building Notes payable
Accounts Wages payable
receivable
Major Account Classifications
Liabilities
Liabilities are
are often
often identified
identified
Assets are on
on the
the balance
balance sheet
sheet
Liabilities by
by
are titles
titles
debts
Assets are Liabilities are debts
resources owned
resources owned that
that include
include
owed payable
payable
to ..
outsiders
owed to outsiders
by
by the
the business.
business. (creditors).
(creditors).
Cash Accounts
Supplies payable
Building Notes payable
Accounts Wages payable
receivable
Major Account Classifications
Owners
Ownersequity equity Revenues
Revenues are are Expenses
Expenses are are the
the
isis the
the owners
owners increases
increases inin using
using upup of
of assets
assets
right
right to
to the
the owners
ownersequity
equity asas or
or consuming
consuming of of
assets
assets of of the
the aa result
result of
of selling
selling services
services to
to
business.
business. services
services or
or generate
generate revenue.
revenue.
Chris Clark, products.
products. Rent Expense
Capital Fees Earned Salary Expense
Chris Clark, Fares Earned Utilities
Drawing Commission Expense
Revenue
Normal Balances of Accounts
Increase
(Normal Balances) Decreases
The
TheT-account
T-account has
has aa title.
title.
The
The T-Account
T-Account
Cash
Left side
debit
The
The left
left side
side of
of the
the account
account isis the
the debit
debit side.
side.
The
The T-Account
T-Account
Cash
Left side Right side
debit credit
The
The right
right side
side of
of the
the account
account isis the
the credit
credit side.
side.
The
The T-Account
T-Account
Cash
3,750 850
4,300 1,400
2,900 700
2,900
Typical entries
Balancing
Balancing aa T-Account
T-Account
Cash
First,
First, foot
foot
the
the debit
debit 3,750 850
side.
side. 4,300 1,400
2,900 700
10,950 2,900
Cash
3,750 850
4,300
Next,
Next, foot
foot the
the
1,400
2,900
credit
credit side.
side. 700
10,950 2,900
5,850
Subtract
Subtract total
total credits
credits
Cash from
from total
total debits
debits to
to
obtain
obtain the
the account
account
3,750 balance.
850
balance.
4,300 1,400
2,900 700
5,100 10,950 2,900
5,850
Transactions and Balance
Sheet Accounts
(A) On
(A) On November
November 1,1, Chris
Chris Clark
Clark
deposits $25,000
deposits $25,000 in
in aa bank
bank account
account
in the
in the name
name of
of NetSolutions.
NetSolutions.
JOURNAL Page 1
Post.
Date Description Debit Credit
2005 Ref.
1 Nov. 1 Cash 25 000 00
2 Chris Clark, Capital 25 000 00
3 Invested cash in NetSolutions.
4
(A) On
(A) On November
November 1,1, Chris
Chris Clark
Clark
deposits $25,000
deposits $25,000 in
in aa bank
bank account
account
in the
in the name
name of
of NetSolutions.
NetSolutions.
4
5 5 Land 20 000 00
6 Cash 20 000 00
7 Purchased land for building
8 site.
9
10
(B) On
(B) On November
November 5,5,
NetSolutions bought
NetSolutions bought land
land
for $20,000,
for $20,000, paying
paying cash.
cash.
10
11 10 Supplies 1 350 00
12 Accounts Payable 1 350 00
13 Purchased supplies on account.
14
15
16
(C) On
(C) On November
November 10,
10, NetSolutions
NetSolutions
purchased supplies
purchased supplies on
on account
account
for $1,350.
for $1,350.
30
31 30 Accounts Payable 950 00
32 Cash 950 00
33 Paid creditors on account.
34
35
36
(F) On
(F) On November
November 30,30, NetSolutions
NetSolutions
paid creditors
paid creditors on
on account,
account, $950.
$950.
OWNERS EQUITY
Owners Equity Accounts
Debit for Credit for
decreases increases
(-) (+)
(D) On
(D) On November
November 18, 18, NetSolutions
NetSolutions
received fees
received fees of
of $7,500
$7,500 from
from
customers for
customers for services
services provided
provided ..
14
15 18 Cash 7 500 00
16 Fees Earned 7 500 00
17 Received fees from customers.
18
19
20
(D) On
(D) On November
November 18, 18, NetSolutions
NetSolutions
received fees
received fees of
of $7,500
$7,500 from
from
customers for
customers for services
services provided
provided ..
Miscellaneous Expense
Nov. 30 275
In
In every
every entry
entry the
the sum
sum ofof
the
the debits
debits always
always equal
equal
the
the sum
sum of
of the
the credits.
credits.
(G) On
(G) On November
November 30, 30, aa count
count revealed
revealed
that $800
that $800 of
of the
the supplies
supplies inventory
inventory
had been
had been used.
used.
25
26 30 Supplies Expense 800 00
27 Supplies 800 00
28 Supplies used during
29 November.
30
31
(G) On
(G) On November
November 30, 30, aa count
count revealed
revealed
that $800
that $800 of
of the
the supplies
supplies inventory
inventory
had been
had been used.
used.
JOURNAL Page 2
Post.
Date Description Debit Credit
2005 Ref.
1 Nov. 30 Chris Clark, Drawing 2 000 00
2 Cash 2 000 00
3 Chris Clark withdrew cash for
4 personal use.
(H) On
(H) On November
November 30,
30, Chris
Chris Clark
Clark
withdrew $2,000
withdrew $2,000 inin cash
cash from
from
NetSolutions for
NetSolutions for personal
personal use.
use.
JOURNAL Page 2
Post.
Date Description Debit Credit
2005 Ref.
1 Dec. 31 Prepaid Insurance 2 400 00
2 Cash 2 400 00
3 Paid premium on two-year
4 policy.
JOURNAL Page 2
Post.
Date Description Debit Credit
2005 Ref.
1 Dec. 1 Prepaid Insurance 2 400 00
2 Cash 2 400 00
3 Paid premium on two-year
4 policy.
14 1 Cash 14 360 00
15 Unearned Rent 23 360 00
16 Received advanced payment
17 For three months rent of land.
Dec. 44 NetSolutions
Dec. NetSolutions purchased
purchased office
office
equipment on
equipment on account
account from
from Executive
Executive
Supply Co.
Supply Co. for
for $1,800.
$1,800.
JOURNAL Page 3
Post.
Date Description Debit Credit
2005 Ref.
1 Dec. 13 Wages Expense 51 950 00
2 Cash 11 950 00
3 Paid two weeks wages.
4
Dec. 16
Dec. 16 NetSolutions
NetSolutions received
received $3,100
$3,100 from
from
fees earned
fees earned for
for the
the first
first half
half of
of
December.
December.
5 16 Cash 11 3 100 00
6 Fees Earned 41 3 100 00
7 Received fees from customers.
8
Dec. 16
Dec. 16 Fees
Fees earned
earned on on account
account totaled
totaled
$1,750 for
$1,750 for the
the first
first half
half of
of
December.
December.
18 21 Cash 11 650 00
19 Accounts Receivable 12 650 00
20 Received cash from customer
21 on account.
Dec. 23
Dec. 23 NetSolutions
NetSolutions paid
paid $1,450
$1,450 for
for
supplies.
supplies.
22 23 Supplies 14 1 450 00
23 Cash 11 1 450 00
24 Purchased supplies.
25
Dec. 27
Dec. 27 NetSolutions
NetSolutions paid
paid the
the receptionist
receptionist
and part-time
and part-time assistant
assistant $1,200
$1,200 for
for
two weeks
two weekswages.
wages.
JOURNAL Page 4
Post.
Date Description Debit Credit
2005 Ref.
1 Dec. 31 Utilities Expense 54 225 00
2 Cash 11 225 00
3 Paid utility bill.
4
Dec. 31
Dec. 31 NetSolutions
NetSolutions received
received $2,870
$2,870 from
from
fees earned
fees earned for
for the
the second
second half
half of
of
December.
December.
5 31 Cash 11 2 870 00
6 Fees Earned 41 2 870 00
7 Received fees from customers.
8
Dec. 31
Dec. 31 NetSolutions
NetSolutions earned
earned $1,120
$1,120 on
on
account for
account for the
the second
second half
half of
of
December.
December.
What
What would
would be
be the
the necessary
necessary
correcting
correcting entry?
entry?
Correcting
Correcting Errors
Errors An
An Example
Example
The
The End
End