Chapter 2, Problem 2.1APCP

1.

To determine

Journal entry:

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

Accounting rules for Journal entries:

• To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
• To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

To Record: Each transaction of Company GA for the month of July.

Explanation of Solution

Journalize the transactions of Company GA for the month of July.

Date	Account Title and Explanation	Debit($)	Credit($)
July 1, 2018	Cash	10,000
	Common Stock		10,000
	(To record the issue of common stock to Person S)
July 1, 2018	Cash	10,000
	Common Stock		10,000
	(To record the issue of common stock to Person T)
July 1, 2018	Prepaid Insurance	4,800
	Cash		4,800
	(To record the purchase of insurance policy)
July 2, 2018	Legal Fees Expense	1,500
	Cash		1,500
	(To record the payment of legal fees for incorporation)
July 4, 2018	Office Supplies	1,800
	Accounts Payable		1,800
	(To record the purchase of supplies on account)
July 7, 2018	Advertising Expense	300
	Cash		300
	(To record the payment for advertising )
July 8, 2018	Equipment–Bikes	12,000
	Cash		12,000
	(To record the purchase of mountain bikes)
July 15, 2018	Cash	2,000
	Service Revenue		2,000
	(To record the collection of cash for services mountain bikes clinic)
July 22, 2018	Cash	2,300
	Service Revenue		2,300
	(To record the collection of cash for services mountain bikes clinic)
July 22, 2018	Advertising Expense	700
	Cash		700
	(To record the payment of salary expenses)
July 30, 2018	Cash	4,000
	Deferred Revenue		4,000
	(To record the receipt of cash in advance for K clinic)

Table (1)

2. and 3.

To determine

T-account:

An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:

• The title of the account
• The left or debit side
• The right or credit side

To Calculate: The balance of each account by posting each transaction to the appropriate T-accounts.

Explanation of Solution

Post the journal entries into T-accounts and determine the balance of each account.

Cash Account

Cash Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0		July 1, 2018	Prepaid insurance (Transaction 3)	4,800
July 1, 2018	Common stock (Transaction 1)	10,000		July 2, 2018	Legal fees expense (Transaction 4)	1,500
July 1, 2018	Common stock (Transaction 2)	10,000		July 7, 2018	Advertising expense (Transaction 6)	300
July 15, 2018	Service revenue (Transaction 8)	2,000		July 8, 2018	Equipment Transaction 7)	12,000
July 22, 2018	Service revenue (Transaction 9)	2,300		July 24, 2018	Advertising expense (Transaction 10)	700
July 30, 2018	Unearned revenue (Transaction 11)	4,000
	Total	28,300			Total	19,300
July 31, 2018	Ending Balance	9,000

Table (2)

Prepaid Insurance Account

Prepaid Insurance Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0				-
July 1, 2018	Cash (Transaction 3)	4,800				-
	Total	4,800			Total	-
July 31, 2018	Ending Balance	4,800

Table (3)

Office Supplies Account

Office Supplies Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0				-
July 4, 2018	Accounts Payable (Transaction 5)	1,800				-
	Total	1,800			Total	-
July 31, 2018	Ending Balance	1,800

Table (4)

Equipment Account

Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0				-
July 8, 2018	Cash (Transaction 7)	12,000				-
	Total	12,000			Total	-
July 31, 2018	Ending Balance	12,000

Table (5)

Accounts Payable

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1, 2018	Beginning balance	0
				July 4, 2018	Office Supplies (Transaction 5)	1,800
					Total	1,800
				July 31, 2018	Ending Balance	1,800

Table (6)

Deferred Revenue

Deferred Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
		-		July 1, 2018	Beginning balance	0
				July 30, 2018	Cash (Transaction 11)	4,000
	Total	-			Total	4,000
				July 31, 2018	Ending Balance	4,000

Table (7)

Common Stock

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1, 2018	Beginning balance	0
				July 1, 2018	Cash (Transaction 1)	10,000
				July 1, 2018	Cash (Transaction 1)	10,000
					Total	20,000
				July 31, 2018	Ending Balance	20,000

Table (8)

Service Revenue

Service Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				July 1, 2018	Beginning balance	0
				July 15, 2018	Cash (Transaction 8)	2,000
				July 22, 2018	Cash (Transaction 9)	2,300
					Total	4,300
				July 31, 2018	Ending Balance	4,300

Table (9)

Advertising Expense

Advertising Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0
July 7, 2018	Cash (Transaction 6)	300
July 24, 2018	Cash (Transaction 10)	700
	Total	1,000
July 31, 2018	Ending Balance	1,000

Table (10)

Legal Fees Expense

Legal Fee Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
July 1, 2018	Beginning balance	0
July 2, 2018	Cash (Transaction 4)	1,500
	Total	1,500
July 31, 2018	Ending Balance	1,500

Table (11)

4.

To determine

Trial balance:

A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.

To Prepare: A trial balance as of July.

Explanation of Solution

Prepare the trial balance of Company GA.

Company GA Trial Balance July 31, 2018
Particulars	Debit ($)	Credit ($)
Cash	9,000
Prepaid Insurance	4,800
Office Supplies	1,800
Equipment	12,000
Accounts Payable		1,800
Unearned Revenue		4,000
Common Stock		20,000
Service Revenue		4,300
Advertising Expense	1,000
Legal Fees Expense	1,500
Total	30,100	30,100

Table (12)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $30,100.