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. Journal entries of Company M are as follows: June, 1– Payment of interest expense Date Accounts Post Ref. Debit ($) Credit ($) June, 1 Interest expense 900 Cash 900 (To record payment of interest expense) Table (1) Interest expense is a component of stockholder’s equity and it decreased the value of stockholder’s equity by $900. Hence, debit the interest expense account for $900. Cash is an assets account and it decreased the value of asset by $900. Hence, credit the cash account for $900. June, 5 – Office furniture purchased on account: Date Accounts Post Ref. Debit ($) Credit ($) June, 5 Office furniture 2,500 Accounts payable 2,500 (To record purchase of office furniture on account) Table (2) Office furniture is an assets account and it increased the value of asset by $2,500. Hence, debit the office furniture account for $2,500. Accounts payable is a liability account and it increased the value of liability by $2,500. Hence, credit the liability account by $2,500. June, 10– Service performed on account: Date Accounts Post Ref. Debit ($) Credit ($) June, 10 Accounts receivable 1,500 Service revenue 1,500 (To record service performed to customer on account) Table (3) Accounts receivable is an assets account and it increased the value of asset by $1,500. Hence, debit the accounts receivable account for $1,500. Service revenue is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,500. Hence, debit the service revenue account for $1,500. June, 12 – Cash borrowed on note: Date Accounts Post Ref...

Financial Accounting (5th Edition) (What's New in Accounting)

5th Edition

ISBN: 9780134727790

Author: Robert Kemp, Jeffrey Waybright

Publisher: PEARSON

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Chapter 2 Solutions

Financial Accounting (5th Edition) (What's New in Accounting)

Ch. 2 - The order in which assets were listed and...Ch. 2 - Prob. 2DQ Ch. 2 - How is revenue related to retained earnings?Ch. 2 - Prob. 4DQ Ch. 2 - Prob. 5DQ Ch. 2 - Prob. 6DQ Ch. 2 - Prob. 7DQ Ch. 2 - Distinguish between journalizing and posting.Ch. 2 - True or false: If the trial balance is in balance,...Ch. 2 - When it is time to prepare the financial...

Ch. 2 - Which sequence of actions correctly summarizes the...Ch. 2 - Prob. 2SC Ch. 2 - Prob. 3SC Ch. 2 - Prob. 4SC Ch. 2 - Prob. 5SC Ch. 2 - Which journal entry records obtaining a bank loan...Ch. 2 - RV Wholesale, Inc., paid 1,200 for supplies and...Ch. 2 - Prob. 8SC Ch. 2 - Prob. 9SC Ch. 2 - Prob. 10SC Ch. 2 - Prob. 11SC Ch. 2 - Prob. 12SC Ch. 2 - Prob. 1SE Ch. 2 - Prob. 2SE Ch. 2 - Prob. 3SE Ch. 2 - Prob. 4SE Ch. 2 - Accounting terminology (Learning Objectives 2, 3, ...Ch. 2 - Effects of debits and credits on accounts...Ch. 2 - Balancing accounts and normal balances (Learning...Ch. 2 - Types of accounts and effects of debits and...Ch. 2 - Re-creating journal entries from T-account...Ch. 2 - Journalizing transactions (Learning Objective 3)...Ch. 2 - Prob. 11SE Ch. 2 - Prob. 12SE Ch. 2 - Prob. 13SE Ch. 2 - Accounting terminology (Learning Objectives 1, 2,...Ch. 2 - Prob. 15AE Ch. 2 - Journalizing transactions (Learning Objective 3)...Ch. 2 - Prob. 17AE Ch. 2 - Balancing accounts and preparing a trial balance...Ch. 2 - Prob. 19AE Ch. 2 - Prob. 20AE Ch. 2 - Prob. 21AE Ch. 2 - Prob. 22AE Ch. 2 - Prob. 23BE Ch. 2 - Prob. 24BE Ch. 2 - Prob. 25BE Ch. 2 - Balancing accounts and preparing a trial balance...Ch. 2 - Recording transactions and preparing a trial...Ch. 2 - Prob. 28BE Ch. 2 - Prob. 29BE Ch. 2 - Prob. 30BE Ch. 2 - Prob. 31AP Ch. 2 - Prob. 32AP Ch. 2 - Journalizing, posting, and preparing a trial...Ch. 2 - Prob. 34AP Ch. 2 - Preparing a trial balance, income statement,...Ch. 2 - Prob. 36AP Ch. 2 - Prob. 37BP Ch. 2 - Prob. 38BP Ch. 2 - Prob. 39BP Ch. 2 - Prob. 40BP Ch. 2 - Prob. 41BP Ch. 2 - Prob. 42BP Ch. 2 - Prob. 1CE Ch. 2 - Prob. 1CP Ch. 2 - Prob. 1CFSAP Ch. 2 - Prob. 1EIA Ch. 2 - Prob. 2EIA Ch. 2 - Prob. 1FA Ch. 2 - Prob. 1IA Ch. 2 - Prob. 1SBA Ch. 2 - Prob. 1WC

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Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions.

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