
Concept explainers
1.
Prepare journal entries to record the given transaction of Company S.
1.

Explanation of Solution
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
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
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
Prepare journal entries to record the given transaction of Company L as follows:
Journal | ||||
Date | Account Title and Explanation | Post | Debit | Credit |
Ref. | ($) | ($) | ||
October 1 | Cash | 101 | 45,000 | |
Office Equipment | 163 | 8,000 | ||
Computer Equipment | 167 | 20,000 | ||
Common Stock | 307 | 73,000 | ||
(To record the amount invested on equipment in exchange of stock.) | ||||
October 2 | Prepaid Rent | 131 | 3,300 | |
Cash | 101 | 3,300 | ||
(To record the rent paid in advance.) | ||||
October 3 | Computer Supplies | 126 | 1,420 | |
Accounts Payable | 201 | 1,420 | ||
(To record the Purchase of supplies on credit.) | ||||
October 5 | Prepaid Insurance | 128 | 2,220 | |
Cash | 101 | 2,220 | ||
(To record Payment of premium for insurance) | ||||
October 6 | 106 | 4,800 | ||
Computer Services Revenue | 403 | 4,800 | ||
(To record the service performed on account.) | ||||
October 8 | Accounts Payable | 201 | 1,420 | |
Cash | 101 | 1,420 | ||
(To record the payment made for the balance due on account) | ||||
October 10 | No entry necessary in the journal. | |||
October 12 | Accounts Receivable | 106 | 1,400 | |
Computer Services Revenue | 403 | 1,400 | ||
(To record the service performed on account.) | ||||
October 15 | Cash | 101 | 4,800 | |
Accounts Receivable | 106 | 4,800 | ||
(To record the cash received from account receivable) | ||||
October 17 | Repairs Expense—Computer | 684 | 805 | |
Cash | 101 | 805 | ||
(To record the cash payment for the repair expense of computer). | ||||
October 20 | Advertising Expense | 655 | 1,728 | |
Cash | 101 | 1,728 | ||
(To record the advertisement expenses incurred). | ||||
October 22 | Cash | 101 | 1,400 | |
Accounts Receivable | 106 | 1,400 | ||
(To record the cash received from account receivable) | ||||
October 28 | Accounts Receivable | 106 | 5,208 | |
Computer Services Revenue | 403 | 5,208 | ||
(To record the cash received from account receivable) | ||||
October 31 | Wages Expense | 623 | 875 | |
Cash | 101 | 875 | ||
(To record the payment made for wages of the employees) | ||||
October 31 | Dividends | 319 | 3,600 | |
Cash | 101 | 3,600 | ||
(To record the payment of cash dividends) | ||||
November 1 | Mileage Expense | 676 | 320 | |
Cash | 101 | 320 | ||
(To record the reimbursement expenses) | ||||
November 2 | Cash | 101 | 4,633 | |
Computer Services Revenue | 403 | 4,633 | ||
(To record the cash received from client) | ||||
November 5 | Computer Supplies | 126 | 1,125 | |
Cash | 101 | 1,125 | ||
(To record the Purchase of computer supplies for cash.) | ||||
November 8 | Accounts Receivable | 106 | 5,668 | |
Computer Services Revenue | 403 | 5,668 | ||
(To record the cash received from account receivable) | ||||
November 13 | No entry necessary. | |||
(No revenue is recognized until the work is performed.) | ||||
November 18 | Cash | 101 | 2,208 | |
Accounts Receivable | 106 | 2,208 | ||
(To record the cash received on account) | ||||
November 22 | Miscellaneous Expenses | 677 | 250 | |
Cash | 101 | 250 | ||
(To record the amount of cash donated.) | ||||
November 24 | Accounts Receivable | 106 | 3,950 | |
Computer Services Revenue | 403 | 3,950 | ||
To record the cash received from account receivable). | ||||
November 25 | No entry necessary. | |||
November 28 | Mileage Expense | 676 | 384 | |
Cash | 101 | 384 | ||
(To record the reimbursement expenses) | ||||
November 30 | Wages Expense | 623 | 1,750 | |
Cash | 101 | 1,750 | ||
(To record the payment made for wages of the employees) | ||||
November 30 | Dividends | 319 | 2,000 | |
Cash | 101 | 2,000 | ||
(To record the payment of cash dividends) |
Table (1)
2.
2.

Explanation of Solution
Posting transactions:
The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.
Cash | Account. No. 101 | |||
Date | PR | Debit | Credit | Balance |
October 1 | 45,000 | 45,000 | ||
2 | 3,300 | 41,700 | ||
5 | 2,220 | 39,480 | ||
8 | 1,420 | 38,060 | ||
15 | 4,800 | 42,860 | ||
17 | 805 | 42,055 | ||
20 | 1,728 | 40,327 | ||
22 | 1,400 | 41,727 | ||
31 | 875 | 40,852 | ||
31 | 3,600 | 37,252 | ||
November 1 | 320 | 36,932 | ||
2 | 4,633 | 41,565 | ||
5 | 1,125 | 40,440 | ||
18 | 2,208 | 42,648 | ||
22 | 250 | 42,398 | ||
28 | 384 | 42,014 | ||
30 | 1,750 | 40,264 | ||
30 | 2,000 | 38,264 |
Accounts Receivable | Account. No. 106 | |||
Date | PR | Debit | Credit | Balance |
October 6 | 4,800 | 4,800 | ||
12 | 1,400 | 6,200 | ||
15 | 4,800 | 1,400 | ||
22 | 1,400 | 0 | ||
28 | 5,208 | 5,208 | ||
November 8 | 5,668 | 10,876 | ||
18 | 2,208 | 8,668 | ||
24 | 3,950 | 12,618 |
Computer Supplies | Account. No. 126 | |||
Date | PR | Debit | Credit | Balance |
October 3 | 1,420 | 1,420 | ||
November 5 | 1,125 | 2,545 |
Prepaid Insurance | Account. No. 128 | |||
Date | PR | Debit | Credit | Balance |
October 5 | 2,220 | 2,220 |
Prepaid Rent | Account. No. 131 | |||
Date | PR | Debit | Credit | Balance |
October 2 | 3,300 | 3,300 |
Office Equipment | Account. No. 163 | |||
Date | PR | Debit | Credit | Balance |
October 1 | 8,000 | 8,000 |
Computer Equipment | Account. No. 167 | |||
Date | PR | Debit | Credit | Balance |
October 1 | 20,000 | 20,000 |
Accounts payable | Account. No. 201 | |||
Date | PR | Debit | Credit | Balance |
October 3 | 1,420 | 1,420 | ||
8 | 1,420 | 0 |
Common stock | Account. No. 307 | |||
Date | PR | Debit | Credit | Balance |
October 1 | 73,000 | 73,000 |
Dividends | Account. No. 319 | |||
Date | PR | Debit | Credit | Balance |
October 31 | 3,600 | 3,600 | ||
November 5 | 2,000 | 5,600 |
Computer Services Revenue | Account. No. 403 | |||
Date | PR | Debit | Credit | Balance |
October 6 | 4,800 | 4,800 | ||
12 | 1,400 | 6,200 | ||
28 | 5,208 | 11,408 | ||
2 | 4,633 | 16,041 | ||
8 | 5,668 | 21,709 | ||
24 | 3,950 | 25,659 |
Wages Expense | Account. No. 623 | |||
Date | PR | Debit | Credit | Balance |
October 31 | 875 | 875 | ||
November 30 | 1,750 | 2,625 |
Advertising Expense | Account. No. 655 | |||
Date | PR | Debit | Credit | Balance |
October 20 | 1,728 | 1,728 |
Mileage Expense | Account. No. 676 | |||
Date | PR | Debit | Credit | Balance |
November 1 | 320 | 320 | ||
28 | 384 | 704 |
Miscellaneous Expenses | Account. No. 677 | |||
Date | PR | Debit | Credit | Balance |
November 22 | 250 | 250 |
Repairs Expense—Computer | Account. No. 684 | |||
Date | PR | Debit | Credit | Balance |
October 17 | 805 | 805 |
Table (2)
3.
Prepare a
3.

Explanation of Solution
Trial balance:
Trial balance is a summary of all the asset, liability, and equity accounts and their balances.
Company B | ||
Trial Balance | ||
November 30 | ||
Particulars | Debit ($) | Credit ($) |
Cash | $38,264 | |
Accounts receivable | 12,618 | |
Computer supplies | 2,545 | |
Prepaid insurance | 2,220 | |
Prepaid rent | 3,300 | |
Office equipment | 8,000 | |
Computer equipment | 20,000 | |
Accounts payable | $0 | |
Common stock | 73,000 | |
Dividends | 5,600 | |
Computer services revenue | 25,659 | |
Wages expense | 2,625 | |
Advertising expense | 1,728 | |
Mileage expense | 704 | |
Miscellaneous expense | 250 | |
Repairs expense-Computer | 805 | |
Totals | $98,659 | $98,659 |
Table (3)
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