Explanation 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 refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity , revenue, and expenditure items are recorded. This account is referred to as the 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: (a) The title of the account (b) The left or debit side (c) The right or credit side Journal entries of Company F are as follows: 1. Issuance of common stock: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash 8,500 Common stock 8,500 (To record the issuance of common stock) Table (1) Cash is an assets account and it increased the value of asset by $8,500. Hence, debit the cash account for $8,500. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $8,500. Hence, credit the common stock for $8,500. 2. Cash borrowed from bank Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash 9,000 Notes payable 9,000 (To record cash borrowed from bank) Table (2) Cash is an assets account and it increased the value of asset by $9,000. Hence, debit the cash account for $9,000. Notes payable is a liability account, and it increased the value of liabilities by $9,000. Hence, credit the notes payable for $9,000. 3. Supplies purchased on account Date Accounts title and explanation Ref. Debit ($) Credit ($) Supplies 800 Accounts payable 800 (To record purchase of supplies on account) Table (3) Supplies are an assets account and it increased the value of asset by $800. Hence, debit the supplies account for $800. Accounts payable is a liability account and it increased the value of liability by $800. Hence, credit the accounts payable account by $800. 4. Purchase of land in cash and on account Date Accounts title and explanation Ref. Debit ($) Credit ($) Land 38,000 Cash 13,000 Notes payable 25,000 (To record the land purchased in cash and on notes) Table (4) Land is an assets account and it increased the value of asset by $38,000. Hence, debit the land account for $38,000. Cash is an assets account and it decreased the value of asset by $13,000. Hence, credit the cash account for $13,000. Notes payable is a liability account, and it increased the value of liabilities by $25,000. Hence, credit the notes payable for $25,000. 5. Sale of supplies in cash Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash 45 Supplies 45 (To record sale of supplies in cash) Table (5) Cash is an assets account and it increased the value of asset by $45. Hence, debit the cash account for $45. Medical supplies are an assets account and it decreased the value of asset by $45. Hence, credit the medical supplies account for $45. 6. Cash paid to creditors Date Accounts title and explanation Ref. Debit ($) Credit ($) December, 31 Accounts payable 310 Cash 310 (To record the cash paid to creditors or lenders) Table (6) Accounts payable is a liability account and it decreased the value of liability by $310...

Financial Accounting, Student Value Edition (12th Edition)

12th Edition

ISBN: 9780134727066

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Chapter 2, Problem 2.23AE

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To prepare: The journal entries from the given T-accounts, determine the ending balance of each account and amount of cash balance and liabilities.

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Chapter 2, Problem 2.22AE

Chapter 2, Problem 2.24AE

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Chapter 2 Solutions

Financial Accounting, Student Value Edition (12th Edition)

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The journal entries from the given T-accounts, determine the ending balance of each account and amount of cash balance and liabilities.

Solution Summary: The author explains journaling as the method of recording monetary business transactions in chronological order.

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To prepare: The journal entries from the given T-accounts, determine the ending balance of each account and amount of cash balance and liabilities.

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Chapter 2 Solutions