Chapter 2, Problem 2.5BE

(a)

To determine

Journal:

Journal refers to the logging of a transaction into accounting journal items. The journal entry consists of different recordings, each of which is a debit or credit. The first step in the accounting process is analyzing the transactions and recording them as journal entries.

Procedure for debiting and crediting an account:

• Increase in assets account, increase in expenses account, and decrease in liabilities account should be debited.
• Decrease in assets account, increase in revenue account, and increase in liabilities account should be credited.

All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

$\boxed{\text{Asset = Liabilities + Stockholders' equity}}$

The effect on the accounting equation and basic and debit-credit analysis by preparing journal entries of the transaction “Opens an office as a financial advisor, investing $5,000 in cash in exchange for common stock.”

(b)

To determine

The effect on the accounting equation and basic and debit-credit analysis by preparing journal entries of the transaction “Pays insurance in advance for 6 months, $1,800 cash.”

(c)

To determine

The effect on the accounting equation and basic and debit-credit analysis by preparing journal entries of the transaction “Receives $1,900 from clients for services performed.”

(d)

To determine

The effect on the accounting equation and basic and debit-credit analysis by preparing journal entries of the transaction “Pays secretary $1,000 salary.”