Chapter 2, Problem 13AP

a.

To determine

Prepare general ledger accounts, Prepare journal entries and record the listed transactions in the appropriate T-accounts.

Explanation of Solution

General ledger:

General ledger is a ledger which is used to summarize all the entries of the subsidiary ledger. The general ledger is used to record the correcting, adjusting and closing entries.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
• Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

Prepare cash account:

Cash
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1	Balance	$8,500

Table (1)

Prepare Accounts Receivable Account:

Accounts Receivable
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1	Balance	$9,800

Table (2)

Prepare Accounts Payable Account:

Accounts Payable
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1	Balance	$2,100

Table (3)

Prepare Notes Payable Account:

Notes Payable
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1	Balance	$5,000

Table (4)

Prepare Common Stock Account:

Common Stock
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1	Balance	$2,000

Table (5)

Prepare Retained Earnings Account:

Retained Earnings
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1	Balance	$9,200

Table (6)

Record the journal entries for the transactions that occurred during July 1 to July 14:

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	1	Rent Expense (E–)	670
		Cash (A–)		670
		(To record rent expense payment)

Table (7)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	2	Cash (A+)	7,100
		Accounts Receivable (A–)		7,100
		(To record amount collected from customers)

Table (8)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	3	Notes Payable (A–)	2,500
		Cash (A–)		2,500
		(To record cash paid for notes payable)

Table (9)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	4	Accounts Receivable (A+)	16,550
		Service Fees Earned (E+)		16,550
		(To record services rendered on account)

Table (10)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	5	Cash (A+)	1,200
		Service Fees Earned (E+)		1,200
		(To record services rendered for cash)

Table (11)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	6	Accounts Payable (A–)	1,400
		Cash (A–)		1,400
		(To record cash paid for creditors on account)

Table (12)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	7	Cash (A+)	12,750
		Accounts Receivable (A–)		12,750
		(To record amount collected from customers on account)

Table (13)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	8	Delivery Expense (E–)	400
		Cash (A–)		400
		(To record delivery expense payment)

Table (14)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	9	Salaries Expense (E–)	4,600
		Cash (A–)		4,600
		(To record salaries expense payment)

Table (15)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	10	Advertising Expense (E–)	600
		Accounts Payable (L+)		600
		(To record advertising expense bill)

Table (16)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	11	Utility Expense (E–)	350
		Cash (A–)		350
		(To record utility expense payment)

Table (17)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	12	Dividends (E–)	2,000
		Cash (A–)		2,000
		(To record dividends payment)

Table (18)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	13	Supplies Expense (E–)	2,260
		Accounts Payable (L+)		2,260
		(To record receipt of advertising expense bill)

Table (19)

Date		Account Titles and Explanations	Debit ($)	Credit ($)
July	14	Equipment (A+)	4,300
		Cash (A–)		4,300
		(To record purchase of computer)

Table (20)

Post the journal entries into T-accounts.

b.

To determine

Prepare a trial balance as of July 31.

Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Preparation of trial balance:

Company P
Trial Balance
As of July 30
Account Titles	Debit ($)	Credit ($)
Cash	13,330
Accounts Receivable	6,500
Equipment	4,300
Accounts Payable		$3,560
Notes Payable		2,500
Common Stock		2,000
Retained Earnings		9,200
Service Fees Earned		17,750
Rent Expense	670
Delivery Expense	400
Salaries Expense	4,600
Advertising Expense	600
Utilities Expense	350
Dividends	2,000
Supplies Expense	2,260
Total	35,010	35,010

Table (21)