Chapter 2, Problem 2SP

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 it in an understandable form. They help in finding out the balance of an account at a given point of time.

Trial balance: Trial balance is the first step in the preparation of the final accounts and it ensures 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 and the ledger accounts and trial balance are 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 Business Solutions are passed as under-

S. No	Particulars	Account No	Debit ($)	Credit ($)
01-Oct	Cash account	101	45,000
	Office equipment account	163	8,000
	Computer equipment account	167	20,000
	S. Rey, capital account	301		73,000
02-Oct	Prepaid rent account		3,300
	Cash account	101		3,300
03-Oct	Computer supplies account		1,420
	Accounts payable account			1,420
05-Oct	Prepaid insurance account		2,220
	Cash account	101		2,220
06-Oct	Accounts receivable account		4,800
	Computer services revenue account			4,800
08-Oct	Accounts payable account		1,420
	Cash account	101		1,420
12-Oct	Accounts receivable account		1,400
	Computer services revenue account			1,400
15-Oct	Cash account		4,800
	Accounts receivable account			4,800
17-Oct	Repairs expense – Computer account		805
	Cash account	101		805
20-Oct	Advertising expense		1,728
	Cash account			1,728
22-Oct	Cash account		1,400
	Accounts receivable account			1,400
28-Oct	Accounts receivable account		3,000
	Computer services revenue account			3,000
31-Oct	Wages expense account		875
	Cash account	101		875
31-Oct	S.Rey, withdrawals account		3,600
	Cash account	101		3,600
01-Nov	Mileage expense		320
	Cash account	101		320
02-Nov	Cash account	101	4,633
	Computer services revenue account			4,633
05-Nov	Computer supplies account		1,125
	Cash account	101		1,125
08-Nov	Accounts receivable account		5,668
	Computer services revenue account			5,668
18-Nov	Cash account	101	2,208
	Accounts receivable account			2,208
22-Nov	Miscellaneous expense account		250
	Cash account			250
24-Nov	Accounts receivable account		3,950
	Computer services revenue account			3,950
25-Nov	Accounts receivable account		3,000
	Computer services revenue account			3,000
28-Nov	Mileage expense		384
	Cash account	101		384
30-Nov	Wages expense account		1,750
	Cash account	101		1,750
30-Nov	S. Rey, withdrawals account		2,000
	Cash account			2,000

2. The ledger accounts in the books of Business Solutions are passed as under-

Cash account
Date	Particulars	Debit ($)	Credit ($)	Account #101 Balance (Dr)
	Opening balance	---
01-Oct	B. Grechus, capital account	45,000		45,000
02-Oct	Prepaid rent account		3,300	41,700
05-Oct	Prepaid insurance account		2,220	39,480
08-Oct	Accounts payable account		1,420	38,060
15-Oct	Accounts receivable account	4,800		42,860
17-Oct	Repairs expense-Computer account		805	42,055
20-Oct	Advertising expense account		1,728	40,327
22-Oct	Accounts receivable account	1,400		41,727
31-Oct	Wages expense account		875	40,852
31-Oct	S. Rey, withdrawals account		3,600	37,252
01-Nov	Mileage expense account		320	36,932
02-Nov	Computer services revenue account	4,633		41,565
05-Nov	Computer supplies account		1,125	40,440
18-Nov	Accounts receivable account	2,208		42,648
22-Nov	Miscellaneous expense account		250	42,398
28-Nov	Mileage expense account		384	42,014
30-Nov	Wages expense account		1,750	40,264
30-Nov	S.Rey, withdrawals account		2,000	38,264

Accounts receivable account
Date	Particulars	Debit ($)	Credit ($)	Account #106 Balance (Dr)
	Opening balance	---
06-Oct	Computer services revenue account	4,800		4,800
12-Oct	Computer services revenue account	1,400		6,200
15-Oct	Cash account		4,800	1,400
22-Oct	Cash account		1,400	0
28-Nov	Computer services revenue account	5,208		5,208
08-Nov	Computer services revenue account	5,668		10,876
18-Nov	Cash account		2,208	8,668
24-Nov	Computer services revenue account	3,950		12,618
25-Nov	Computer services revenue account	3,000		15,618

Computer supplies account
Date	Particulars	Debit ($)	Credit ($)	Account #126 Balance (Dr)
	Opening balance	---
03-Oct	Accounts payable	1,420		1,420
05-Nov	Cash account	1,125		2,545

Prepaid insurance account
Date	Particulars	Debit ($)	Credit ($)	Account #128 Balance (Dr)
	Opening balance	---
05-Oct	Cash account	2,220		2,220

Prepaid rent account
Date	Particulars	Debit ($)	Credit ($)	Account #131 Balance (Dr)
	Opening balance	---
02-Oct	Cash account	3,300		3,300

Office equipment account
Date	Particulars	Debit ($)	Credit ($)	Account #163 Balance (Dr)
	Opening balance	---
01-Oct	S. Rey, capital account	8,000		8,000

Computer equipment account
Date	Particulars	Debit ($)	Credit ($)	Account #167 Balance (Dr)
	Opening balance	---
	B. Grechus, capital account	20,000		20,000

Accounts payable account
Date	Particulars	Debit ($)	Credit ($)	Account #201 Balance (Cr)
	Opening balance	---
03-Oct	Computer supplies account		1,420	1,420
08-Oct	Cash account	1,420		0

S. Rey, capital account
Date	Particulars	Debit ($)	Credit ($)	Account #301 Balance (Cr)
	Opening balance	---
	Cash account		45,000	45,000
	Office equipment account		8,000	53,000
	Computer equipment account		20,000	73,000

S. Rey, withdrawals account
Date	Particulars	Debit ($)	Credit ($)	Account #302 Balance (Dr)
	Opening balance	---
31-Oct	Cash account	3,600		3,600
30-Nov	Cash account	2,000		5,600

Computer services revenue account
Date	Particulars	Debit ($)	Credit ($)	Account #402 Balance (Cr)
	Opening balance	---
06-Oct	Accounts receivable account		4,800	4,800
12-Oct	Accounts receivable account		1,400	6,200
28-Oct	Accounts receivable account		5,208	11,408
02-Nov	Cash account		4,633	16,041
08-Nov	Accounts receivable account		5,668	21,709
24-Nov	Accounts receivable account		3,950	25,659
25-Nov	Accounts receivable account		3,000	28,659

Wages expense account
Date	Particulars	Debit ($)	Credit ($)	Account #623 Balance (Dr)
	Opening balance	---
31-Oct	Cash account	875		875
30-Nov	Cash account	1,750		2,625

Advertising expense account
Date	Particulars	Debit ($)	Credit ($)	Account #655 Balance (Dr)
	Opening balance	---
20-Oct	Cash account	1,728		1,728

Mileage expense account
Date	Particulars	Debit ($)	Credit ($)	Account #676 Balance (Dr)
	Opening balance	---
01-Nov	Cash account	320		320
28-Nov	Cash account	384		704

Miscellaneous expense account
Date	Particulars	Debit ($)	Credit ($)	Account #677 Balance (Dr)
	Opening balance	---
22-Nov	Cash account	250		250

Repairs expense – Computer account
Date	Particulars	Debit ($)	Credit ($)	Account #684 Balance (Dr)
	Opening balance	---
17-Oct	Accounts payable account	805		805

Note: Accounting entries are not required for the following transactions

Nov 13 – Revenue can be recognized only when all the risks and rewards of ownership of services are transferred. The acceptance of a bid does not mean the execution or completion of a service.

3. The trial balance of Business Solutions as on November, 30

S. No	Ledger No	Ledger Name	Debit ($)	Credit ($)
1	101	Cash	38,264
2	106	Accounts receivable	15,618
3	126	Computer supplies	2,545
4	128	Prepaid insurance	2,220
5	131	Prepaid rent	3,300
6	163	Office equipment	8,000
7	167	Computer equipment	20,000
8	201	Accounts payable		0
9	301	S.Rey, capital		73,000
10	302	S.Rey, withdrawals	5,600
11	403	Computer services revenue		28,659
12	623	Wages expense	2,625
13	655	Advertising expense	1,728
14	676	Mileage expense	704
15	677	Miscellaneous expenses	250
16	684	Repairs expense - Computer	805
TOTAL			101,659	101,659

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