Chapter 2, Problem 1BP

1.

To determine

Prepare journal entries to record the given transaction.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

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.

Prepare journal entries to record the given transaction of Company H as follows:

Journal
Date	Account Title and Explanation	Post	Debit	Credit
		Ref.	($)	($)
September 1	Cash	101	38,000
	Office Equipment	163	15,000
	Common Stock	307		53,000
	(To record the amount invested on equipment in exchange of stock.)
September  2	Prepaid Rent	131	9,000
	Cash	101		9,000
	(To record the rent paid in advance.)
September  4	Office Equipment	163	8,000
	Office Supplies	124	2,400
	Accounts Payable	201		10,400
	(To record the Purchase of equipment & supplies on credit.)
September  8	Cash	101	3,280
	Services Revenue	401		3,280
	(To record receipt of cash for the service performed.)
September   12	Accounts Receivable	106	15,400
	Services Revenue	401		15,400
	(To record the service performed on account.)
September   13	Accounts Payable	201	10,400
	Cash	101		10,400
	(To record the payment made for the balance due on account)
September   19	Prepaid Insurance	128	1,900
	Cash	101		1,900
	(To record Payment of premium for insurance)
September  22	Cash	101	7,700
	Accounts Receivable	106		7,700
	(To record the cash received on account)
September  24	Accounts Receivable	106	2,100
	Services Revenue	401		2,100
	(To record the service performed on account.)
September  28	Dividends	319	5,300
	Cash	101		5,300
	(To record the payment of cash  dividends)
September  29	Office Supplies	124	550
	Accounts Payable	201		550
	(To record the purchase of supplies on account)
September  30	Utilities Expense	690	860
	Cash	101		860
	(To record the utility bill incurred)

Table (1)

2.

To determine

Post the journal entries from Part 1 to their respective ledger accounts.

Explanation of Solution

Posting transactions:

The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Cash			Account. No. 101
Date	PR	Debit	Credit	Balance
September 1	G1	38,000		38,000
2	G1		9,000	29,000
8	G1	3,280		32,280
13	G1		10,400	21,880
19	G1		1,900	19,980
22	G1	7,700		27,680
28	G1		5,300	22,380
30	G1		860	21,520

Accounts Receivable			Account. No. 106
Date	PR	Debit	Credit	Balance
September 12	G1	15,400		15,400
22	G1		7,700	7,700
24	G1	2,100		9,800

Office Supplies			Account. No. 124
Date	PR	Debit	Credit	Balance
September 4	G1	2,400		2,400
29	G1	550		2,950

Prepaid Insurance			Account. No. 128
Date	PR	Debit	Credit	Balance
September  19	G1	1,900		1,900

Prepaid Rent			Account. No. 131
Date	PR	Debit	Credit	Balance
September  2	G1	9,000		9,000

Office Equipment			Account. No. 163
Date	PR	Debit	Credit	Balance
September  1	G1	15,000		15,000
4	G1	8,000		23,000

Accounts payable			Account. No. 201
Date	PR	Debit	Credit	Balance
September  4	G1		10,400	10,400
13	G1	10,400		0
29	G1		550	550

Common stock			Account. No. 307
Date	PR	Debit	Credit	Balance
September  1	G1		53,000	53,000

Dividends			Account. No. 319
Date	PR	Debit	Credit	Balance
September  28	G1	5,300		5,300

Service revenue			Account. No. 403
Date	PR	Debit	Credit	Balance
September  8	G1		3,280	3,280
12	G1		15,400	18,680
24	G1		2,100	20,780

Utilities expenses			Account. No. 690
Date	PR	Debit	Credit	Balance
September  30	G1	860		860

Table (2)

3.

To determine

Prepare a trial balance of Company H as of September 30.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Company H
Trial Balance
September  30
Particulars	Debit ($)	Credit ($)
Cash	$21,520
Accounts receivable	9,800
Office supplies	2,950
Prepaid insurance	1,900
Prepaid rent	9,000
Office equipment	23,000
Accounts payable		$550
Common stock		53,000
Dividends	5,300
Services revenue		20,780
Utilities expense	860
Total	$74,330	$74,330

Table (3)