(a)
Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these
Accounting rules for journal entries:
- To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
- To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.
Assets: Assets refer to those resources that an organization owns, against which the organization derives a value in the future.
Cost: Cost refers to an amount paid or to be paid for any purpose. It is the monetary value of the time, efforts and resources utilized to do or get something.
Commercial Substance: Commercial substance is said to exist in an event only when the transaction results in generation of
To Prepare: The journal entries to record the exchange of assets for M Company.
(b)
To Prepare: The journal entries to record the exchange of assets for P Company.

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Chapter 10 Solutions
ACCOUNTING PRINCIPLES
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