Concept explainers
1.
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 T Cat Services for the month of December.
1.
Explanation of Solution
Journalize the transactions of T Cat Services for the month of December.
Date | Account Title and Explanation | Debit($) | Credit($) |
December 1 | Cash | 27,400 | |
Service Revenue | 27,400 | ||
(To record the service revenue for cash) | |||
December 4 | Pet Supplies | 2,900 | |
Accounts Payable | 2,900 | ||
(To record the purchase of office supplies on Accounts Payable) | |||
December 8 | Advertising Expenses | 3,200 | |
Accounts Payable | 3,200 | ||
(To record the advertising expenses on account) | |||
December 9 | Accounts payable | 2,900 | |
Cash | 2,900 | ||
(To record the payment of cash ) | |||
December 12 | Cash | 5,000 | |
Common Stock | 5,000 | ||
(To record the issuance of common stock) | |||
December 9 | Accounts payable | 6,300 | |
Cash | 6,300 | ||
(To record the payment of cash ) | |||
December 19 | Equipment | 7,700 | |
Cash | 7,700 | ||
(To record the purchase of equipment) | |||
December 22 | Utilities expenses | 4,500 | |
Cash | 4,500 | ||
(To record the payment of utility expenses) | |||
December 24 | Cash | 2,300 | |
Deferred Revenue | 2,300 | ||
(To record the receipt of cash in advance for deferred service revenue) | |||
December 27 | No entry | ||
December 30 | Salaries Expense | 7,000 | |
Cash | 7,000 | ||
(To record the payment of salary expenses) | |||
December 31 | Dividends | 3,000 | |
Cash | 3,000 | ||
(To record the payment of cash dividends) |
Table (1)
2. and 3.
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.
2. and 3.
Explanation of Solution
Cash Account
Cash Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning Balance | 19,400 | December 8 | Advertising | 3,200 | |
December 1 | Cash Sales | 27,400 | December 9 | Accounts payable | 2,900 | |
December 12 | Common stock | 5,000 | December 16 | Accounts payable | 6,300 | |
December 24 | Cash collection | 2,300 | December 19 | Equipment | 7,700 | |
December 22 | Utilities | 4,500 | ||||
December 30 | Salaries | 7,000 | ||||
December 31 | Dividends | 3,000 | ||||
December 31 | Closing balance | 19,500 | ||||
Total | 54,100 | Total | 54,100 | |||
December 31 | Balance | 19,500 |
Table (2)
Supplies
Supplies Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 1,500 | December 31 | Closing balance | 4,400 | |
December 4 | Accounts payable | 2,900 | ||||
Total | 4,400 | Total | 4,400 | |||
December 31 | Balance | 4,400 |
Table (3)
Prepaid Rent
Prepaid Rent Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Beginning Balance | 7,200 | December 31 | Closing Balance | 7,200 | |
July 31 | Total | 7,200 | Total | 7,200 |
Table (4)
Equipment
Equipment Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
December 1 | Beginning balance | 83,700 | December 31 | Closing Balance | 91,400 | |
December 19 | Cash | 7,700 | ||||
December 31 | Total | 91,400 | Total | 91,400 |
Table (5)
Building
Building Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 240,000 | December 31 | Closing balance | 240,000 | |
Total | 240,000 | Total | 240,000 | |||
December 31 | Balance | 240,000 |
Table (6)
Accounts Payable
Accounts Payable Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 9 | Cash paid | 2,900 | December 1 | Beginning Balance | 9,800 | |
December 16 | Cash paid | 6,300 | December 4 | Supplies | 2,900 | |
December 31 | Closing balance | 3,500 | ||||
Total | 12,700 | Total | 12,700 | |||
December 31 | Balance | 3,500 |
Table (7)
Unearned Service revenue
Unearned Service revenue Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
June 30 | Closing Balance | 4,300 | December 1 | Beginning balance | 2,000 | |
December 24 | Cash | 2,300 | ||||
Total | 4,300 | Total | 4,300 |
Table (8)
Common Stock
Common Stock Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 130,000 | December 1 | Beginning balance | 125,000 | |
December 12 | Issued | 5,000 | ||||
Total | 130,000 | Total | 130,000 | |||
December 31 | Balance | 130,000 |
Table (9)
Retained earnings Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 75,500 | December 1 | Beginning balance | 75,500 | |
Total | 75,500 | Total | 75,500 | |||
December 31 | Balance | 75,500 |
Table (10)
Dividends
Dividends Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 9,000 | December 31 | Closing balance | 12,000 | |
December 31 | Cash | 3,000 | ||||
Total | 12,000 | Total | 12,000 | |||
December 31 | Balance | 12,000 |
Table (11)
Service revenue
Service revenue | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 31 | Closing balance | 291,400 | December 1 | Beginning balance | 264,000 | |
December 1 | Cash | 27,400 | ||||
Total | 291,400 | Total | 291,400 | |||
December 31 | Balance | 291,400 |
Table (12)
Salaries Expense
Salaries Expense Account | ||||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |||
December 1 | Beginning balance | 65,000 | December 31 | Closing balance | 72,000 | |||
December 31 | Cash | 7,000 | ||||||
Total | 72,000 | Total | 72,000 | |||||
December 31 | Balance | 72,000 |
Table (13)
Advertising Expense
Advertising Expense Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 18,200 | December 31 | Closing balance | 21,400 | |
December 8 | cash | 3,200 | ||||
Total | 21,400 | Total | 21,400 | |||
December 31 | Balance | 21,400 |
Table (14)
Utilities Expense
Utilities Expense Account | ||||||
Date | Details | Debit ($) | Date | Details | Credit ($) | |
December 1 | Beginning balance | 32,300 | December 31 | Closing balance | 36,800 | |
December 31 | Cash | 4,500 | ||||
Total | 36,800 | Total | 36,800 | |||
December 31 | Balance | 36,800 |
Table (15)
4.
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 December.
4.
Explanation of Solution
Prepare the trial balance of T Cat Services for the month of December.
T Cat Services | ||
Trial Balance | ||
For the Month Ended December 31 | ||
Accounts | Debit ($) | Credit ($) |
Cash | 19,500 | |
Prepaid Rent | 4,400 | |
Supplies | 7,200 | |
Equipment | 91,400 | |
Building | 240,000 | |
Accounts Payable | 3,500 | |
Unearned Service Revenue | 4,300 | |
Common Stock | 130,000 | |
Retained Earnings | 75,500 | |
Dividends | 12,000 | |
Service Revenue | 291,400 | |
Salaries Expense | 72,000 | |
Advertising Expense | 21,400 | |
Utilities Expense | 36,800 | |
Total | 504,700 | 504,700 |
Table (16)
Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $504,700.
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