Chapter 2, Problem 2BPSB

To determine

Concept Introduction:

Journal entry: In double entry system of accounting, journalizing is the recording of the given accounting transactions by giving effects to debits and credits.

Ledger accounts: Ledger accounts are the refinement of journal entries by presenting them in an understandable form that helps in finding out the balance of an account at a given point in time.

Trial balance: Trial balance is the first step in the preparation of the final accounts and for ensuring that the arithmetical accuracy of the books of accounts prepared.

To write: The general journal entries, ledger accounts and the trial balance

Explanation of Solution

The journal entries are passed; ledger accounts and trial balance is prepared.

The debit-credit rules for recording the journal entries are as under –

1. Debit what comes in, credit what goes out.
2. Debit the receiver, credit the giver.
3. Debit the expenses and assets, credit the incomes and liabilities.

1. The journal entries in the books of Softworks are passed as under-

S. No	Particulars	Account No	Debit ($)	Credit ($)
a.	Cash account	101	65,000
	Office equipment account	163	5,750
	Computer equipment account	164	30,000
	B. Grechus, capital account	301		100,750
b.	Land account	172	22,000
	Cash account	101		5,000
	Notes payable account	250		17,000
c.	Building account	170	34,500
	Cash account	101		34,500
d.	Prepaid insurance account	108	5,000
	Cash account	101		5,000
e.	Cash account	101	4,600
	Fees earned account	402		4,600
f.	Computer equipment account	164	4,500
	Cash account	101		800
	Notes payable account	250		3,700
g.	Accounts receivable account	106	4,250
	Fees earned account	402		4,250
h.	Office equipment account	163	950
	Accounts payable account	201		950
i.	Accounts receivable account	106	10,200
	Fees earned account	402		10,200
j.	Computer rental expense account	602	580
	Accounts payable account	201		580
k.	Cash account	101	5,100
	Accounts receivable account	106		5,100
l.	Wages expense account	601	1,800
	Cash account	101		1,800
m.	Accounts payable account	201	950
	Cash account	101		950
n.	Repairs expense account	604	608
	Cash account	101		608
o.	B. Grechus withdrawals	302	6,230
	Cash account	101		6,230
p.	Wages expense account	601	1,800
	Cash account	101		1,800
q.	Advertising expense	603	750
	Cash account	101		750

2. Ledger accounts in the books of Softworks are passed as under-

Cash account
Date	Particulars	Debit ($)	Credit ($)	Account #101 Balance (Dr)
	Opening balance	---
	B. Grechus, capital account	65,000		65,000
	Land account		5,000	60,000
	Building account		34,500	25,500
	Prepaid insurance account		5,000	20,500
	Fees earned account	4,600		25,100
	Computer equipment account		800	24,300
	Accounts receivable account	5,100		29,400
	Wages expense account		1,800	27,600
	Accounts payable account		950	26,650
	Repairs expense account		608	26,042
	B. Grechus, withdrawals account		6,230	19,812
	Wages expense account		1,800	18,012
	Advertising expense account		750	17,262

Accounts receivable account
Date	Particulars	Debit ($)	Credit ($)	Account #106 Balance (Dr)
	Opening balance	---
	Fees earned account	4,250		4,250
	Fees earned account	10,200		14,450
	Cash account		5,100	9,350

Prepaid insurance account
Date	Particulars	Debit ($)	Credit ($)	Account #108 Balance (Dr)
	Opening balance	---
	Cash account	5,000		5,000

Office equipment account
Date	Particulars	Debit ($)	Credit ($)	Account #163 Balance (Dr)
	Opening balance	---
	B. Grechus, capital account	5,750		5,750
	Accounts payable account	950		6,700

Computer equipment account
Date	Particulars	Debit ($)	Credit ($)	Account #164 Balance (Dr)
	Opening balance	---
	B. Grechus, capital account	30,000		30,000
	Cash account	800		30,800
	Notes payable account	3,700		34,500

Building account
Date	Particulars	Debit ($)	Credit ($)	Account #170 Balance (Dr)
	Opening balance	---
	Cash account	34,500		34,500

Land account
Date	Particulars	Debit ($)	Credit ($)	Account #172 Balance (Dr)
	Opening balance	---
	Cash account	5,000		5,000
	Notes payable account	17,000		22,000

Accounts payable account
Date	Particulars	Debit ($)	Credit ($)	Account #201 Balance (Cr)
	Opening balance	---
	Office equipment account		950	950
	Computer rental expense account		580	1,530
	Cash account	950		580

Notes payable account
Date	Particulars	Debit ($)	Credit ($)	Account #250 Balance (Cr)
	Opening balance	---
	Land account		17,000	17,000
	Computer equipment account		3,700	20,700

B. Grechus, capital account
Date	Particulars	Debit ($)	Credit ($)	Account #301 Balance (Cr)
	Opening balance	---
	Cash account		65,000	65,000
	Office equipment account		5,750	72,750
	Computer equipment account		30,000	100,750

B. Grechus, withdrawal account
Date	Particulars	Debit ($)	Credit ($)	Account #302 Balance (Dr)
	Opening balance	---
	Cash account	6,230		6,230

Fees earned account
Date	Particulars	Debit ($)	Credit ($)	Account #402 Balance (Cr)
	Opening balance	---
	Cash account		4,600	4,600
	Accounts receivable account		4,250	8,850
	Accounts receivable account		10,200	19,050

Wages expense account
Date	Particulars	Debit ($)	Credit ($)	Account #601 Balance (Dr)
	Opening balance	---
	Cash account	1,800		1,800
	Cash account	1,800		3,600

Computer rental expense account
Date	Particulars	Debit ($)	Credit ($)	Account #602 Balance (Dr)
	Opening balance	---
	Accounts payable account	580		580

Advertising expense account
Date	Particulars	Debit ($)	Credit ($)	Account #603 Balance (Dr)
	Opening balance	---
	Cash account	750		750

Repairs expense account
Date	Particulars	Debit ($)	Credit ($)	Account #604 Balance (Dr)
	Opening balance	---
	Cash account	608		608

3. The trial balance of Softworks as on April, 30

S. No	Ledger No	Ledger Name	Debit ($)	Credit ($)
1	101	Cash	17,262
2	106	Accounts receivable	9,350
3	108	Prepaid insurance	5,000
4	163	Office equipment	6,700
5	164	Computer equipment	34,500
6	170	Building	34,500
7	172	Land	22,000
8	201	Accounts payable		580
9	250	Notes payable		20,700
10	301	B.Grechus, capital		100,750
11	302	B.Grechus, withdrawals	6,230
12	402	Fees earned		19,050
13	601	Wages expense	3,600
14	602	Computer rental expense	580
15	603	Advertising expense	750
16	604	Repairs expense	608
TOTAL			141,080	141,080

The journal entries are thus passed and the ledger accounts and trial balance are thus prepared.