
Concept explainers
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’. - The components of the T-account are as follows:
-
- a) The title of the account
- b) The left or debit side
- c) The right or credit side
To Post: The journal entries to the T-accounts.

Explanation of Solution
Post the
T-account of Cash Account:
Cash Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | Equipment (Transaction 2) | 10,000 | ||
Common stock (Transaction 1) |
300,000 |
Rent expense (Transaction 5) |
5,000 | |||
(Transaction 8) |
55,000 | Prepaid insurance (Transaction 6) | 6,000 | |||
Accounts payable (Transaction 7) |
70,000 | |||||
Total | 355,000 | Total | 91,000 | |||
March 31 | Ending Balance | 264,000 |
Table (1)
Cash is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the cash account, and credit all the journal entries which decrease the cash account.
T-account of Accounts Receivable:
Accounts Receivable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 |
Cash (Transaction 8) |
55,000 | ||
Service Revenue (Transaction 4) |
120,000 | |||||
Total | 120,000 | Total | 55,000 | |||
March 31 | Ending Balance | 65,000 |
Table (2)
Accounts receivable is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the accounts receivable account, and credit all the journal entries which decrease the accounts receivable account.
T-account of Inventory Account:
Inventory Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 |
Cost of goods sold (Transaction 4) |
70,000 | ||
Accounts payable (Transaction 3) |
90,000 | |||||
Total | 90,000 | Total | 70,000 | |||
March 31 | Ending Balance | 20,000 |
Table (3)
Inventory is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the inventory account, and credit all the journal entries which decrease the inventory account.
T-account of Prepaid Insurance Account:
Prepaid Insurance Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | - | |||
Cash (Transaction 6) |
6,000 | |||||
Total | 6,000 | Total | - | |||
March 31 | Ending Balance | 6,000 |
Table (4)
Prepaid insurance is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the prepaid insurance account, and credit all the journal entries which decrease the prepaid insurance account.
T-account of Equipment Account:
Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | - | |||
Cash (Transaction 2) |
40,000 | - | ||||
Total | 40,000 | Total | - | |||
March 31 | Ending Balance | 40,000 |
Table (5)
Equipment is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the equipment account, and credit all the journal entries which decrease the equipment account.
T-account of
Accumulated Depreciation-Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | ||||
Depreciation expense (Transaction 9) | 1,000 | |||||
March 31 | Ending Balance | 1,000 |
Table (6)
Accumulated Depreciation – Equipment is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the accumulated depreciation–Equipment account, and credit all the journal entries which increase the accumulated depreciation–Equipment account.
T-account of Accounts Payable:
Accounts Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
Cash (Transaction 7) |
70,000 | March 1 | Beginning balance | 0 | ||
Inventory (Transaction 3) | 90,000 | |||||
Total | 70,000 | Total | 90,000 | |||
March 31 | Ending Balance | 20,000 |
Table (7)
Accounts payable is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the accounts payable account, and credit all the journal entries which increase the accounts payable account.
T-account of Notes Payable:
Notes Payable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | ||||
Equipment (Transaction 2) |
30,000 | |||||
Total | 30,000 | |||||
March 31 | Ending Balance | 30,000 |
Table (8)
Notes payable is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the notes payable account, and credit all the journal entries which increase the notes payable account.
T-account of Common Stock:
Common Stock Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | ||||
Cash (Transaction 1) | 300,000 | |||||
Total | 300,000 | |||||
March 31 | Balance | 300,000 |
Table (9)
Common stock is a component of owner’s equity, and it has a normal credit balance. Hence, debit all the journal entries which decrease the common stock account, and credit all the journal entries which increase the common stock account.
T-account of Sales Revenue:
Sales Revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | ||||
Accounts receivable (Transaction 4) | 120,000 | |||||
Total | 120,000 | |||||
March 31 | Ending Balance | 120,000 |
Table (10)
Sales Revenue is a revenue account which is a component of owner’s equity, and it has a credit balance. Hence, debit all the journal entries which decrease the sales revenue account, and owner’s equity, and credit all the journal entries which increase the sales revenue account, and owner’s equity.
T-account of Cost of Goods Sold:
Cost of Goods Sold Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | - | |||
Inventory (Transaction 4) | 70,000 | |||||
Total | 70,000 | Total | - | |||
March 31 | Ending Balance | 70,000 |
Table (11)
Cost of goods sold is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the cost of goods sold account, and decrease the owner’s equity account, and credit all the journal entries which decrease the cost of goods sold account, and increase the owner’s equity account.
T-account of Rent Expense:
Rent Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | - | |||
Cash(Transaction 5) | 5,000 | |||||
Total | 5,000 | Total | - | |||
March 31 | Ending Balance | 5,000 |
Table (12)
Rent expense is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the rent expense account, and decrease the owner’s equity account, and credit all the journal entries which decrease the rent expense account, and increase the owner’s equity account.
T-account of Depreciation Expense:
Depreciation Expense Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) |
|
March 1 | Beginning balance | 0 | - | |||
Accumulated depreciation (Transaction 9) | 1,000 | |||||
Total | 1,000 | Total | - | |||
March 31 | Ending Balance | 1,000 |
Table (13)
Depreciation expense is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the depreciation account, and decrease the owner’s equity account, and credit all the journal entries which decrease the depreciation account, and increase the owner’s equity account.
To Prepare: A

Explanation of Solution
Trial Balance:
Trial Balance is prepared at the end of an accounting period listing all the ledgers and their balances. The total of the debit balances in the trial balance shall match the total of the credit balances. It is prepared to check whether there is any mathematical error in the accounts.
Prepare a trial balance for Corporation W from the ending account balances.
Corporation W Trial Balance |
||
Particulars | Debit ($) | Credit ($) |
Cash | 264,000 | |
Accounts receivable | 65,000 | |
Inventory | 20,000 | |
Prepaid Insurance | 6,000 | |
Equipment | 40,000 | |
Accumulated |
1,000 | |
Accounts payable | 20,000 | |
Notes payable | 30,000 | |
Common stock | 300,000 | |
Sales revenue | 120,000 | |
Cost of goods sold | 70,000 | |
Rent expense | 5,000 | |
Depreciation expense | 1,000 | |
Total | 471,000 | 471,000 |
Table (14)
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