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Introduction:
Expenses refer to
Requirement 1:
To Determine:
Answer to Problem 2SP
Solution:
| Date | Particulars | Debit Amount | Credit Amount |
| 01.10.2015 | Cash | 45,000 | |
| Office Equipment | 8,000 | ||
| Computer Equipment | 20,000 | ||
| Capital | 73,000 | ||
| (Owner invests cash and equipment as capital) | |||
| 02.10.2015 | Prepaid Rent | 3,300 | |
| Cash | 3,300 | ||
| (Paid for months’ rent in advance) | |||
| 03.10.2015 | Computer Supplies | 1,420 | |
| Accounts Payable | 1,420 | ||
| (purchased supplies on credit) | |||
| 05.10.2015 | Prepaid Insurance | 2,220 | |
| Cash | 2,220 | ||
| (Paid 12 months’ premium in advance) | |||
| 06.10.2015 | 4,800 | ||
| Computer Services Revenue | 4,800 | ||
| (Billed customer for services) | |||
| 08.10.2015 | Accounts Payable | 1,420 | |
| Cash | 1,420 | ||
| (Paid balance due on accounts payable) | |||
| 12.10.2015 | Accounts Receivable | 1,400 | |
| Computer Service Revenue | 1,400 | ||
| (Billed customer for services) | |||
| 15.10.2015 | Cash | 4,800 | |
| Accounts Receivable | 4,800 | ||
| (Collected accounts receivable) | |||
| 17.10.2015 | Repairs Expense − Computer | 805 | |
| Cash | 805 | ||
| (Paid for computer repairs) | |||
| 20.102015 | Advertising Expense | 1,728 | |
| Cash | 1,728 | ||
| (Purchased ads in local newspaper) | |||
| 22.10.2015 | Cash | 1,400 | |
| Accounts Receivable | 1,400 | ||
| (Collected Accounts Receivable) | |||
| 28.10.2015 | Accounts Receivable | 5,208 | |
| Computer Service Revenue | 5,208 | ||
| (Billed customer for services) | |||
| 31.10.2015 | Wages Expense | 875 | |
| Cash | 875 | ||
| (Paid employee for part time work) | |||
| 31.10.2015 | Drawing | 3,600 | |
| Cash | 3,600 | ||
| (Withdrew cash for personal use) | |||
| 01.11.2015 | Mileage Expense | 320 | |
| Cash | 320 | ||
| (Reimbursed R for mileage) | |||
| 02.11.2015 | Cash | 4,633 | |
| Computer Service Revenue | 4,633 | ||
| (Collected cash revenue from client) | |||
| 05.11.2015 | Computer Supplies | 1,125 | |
| Cash | 1,125 | ||
| (Purchased computer supplies for cash) | |||
| 08.11.2015 | Accounts Receivable | 5,668 | |
| Computer Service Revenue | 5,668 | ||
| (Billed customer for services) | |||
| 18.11.2015 | Cash | 2,208 | |
| Accounts Receivable | 2,208 | ||
| (Collected Accounts Receivable) | |||
| 22.11.2015 | Miscellaneous Expenses | 250 | |
| Cash | 250 | ||
| (Record donation) | |||
| 24.11.2015 | Accounts Receivable | 3,950 | |
| Computer Service Revenue | 3,950 | ||
| (Billed customer for services) | |||
| 28.11.2015 | Mileage Expense | 384 | |
| Cash | 384 | ||
| (Reimbursed R for mileage) | |||
| 30.11.2015 | Wages Expense | 1,750 | |
| Cash | 1,750 | ||
| (Paid employee for part time work) | |||
| 30.11.2015 | Drawing | 2,000 | |
| Cash | 2,000 | ||
| (Withdrew Cash for personal use) |
Explanation of Solution
Explanations:
On October 1, increase in asset is debited. As Santana Rey is raising equity by means of contributing cash and equipment, the asset of the company increases. Increase in equity is credited.
On October 2, rent for four months has been paid in advance. Prepaid Rent is an asset as it is an expense that has not expired as on the date when the books were prepared. Increase in current asset is debited.
On October 3, computer supplies were purchased on credit. Computer Supplies are an asset to the company and an increase in asset is debited. It has been purchased on account thereby increasing the liability. Increase in liability is credited.
On October 5, Insurance Premium is paid in advance. Prepaid Insurance is an asset as it is an expense that has not expired as on the date when the books were prepared. Increase in current asset is debited.
On October 6, services were paid but fees have not been received so far. As such, money would be collected later. Receivables account will be created that is debited as it is a current asset.
On October 8,
payment is made for the computer supplies that were acquired on credit. Since the liability is decreased, accounts payable account is debited.
On October 12, services were paid but fees have not been received so far. As such, money would be collected later. Receivables account will be created that is debited as it is a current asset.
On October 15, payment for the services rendered to Easy Leasing worth $4,800 has been received thereby reducing accounts receivables (asset) by $4,800. However, another asset (Cash) is increased by $4,800.
On October 17, amount is paid for repairing computers. Repairs are an expense and increase in expense is debited.
On October 20, advertisement in local newspaper is purchased. Advertising is an expense and increase in expense is debited.
On October 22, payment for the services rendered to Easy Leasing worth $1,400 has been received thereby reducing accounts receivables (asset) by $1,400. However, another asset (Cash) is increased by $1,400.
On October 28, payment has not been received for the services rendered to IFM company thereby increasing the accounts receivable account by $5,208.
On October 31, amount is paid for wages. Wages is an expense and increase in expense is debited.
On October 31, Cash is withdrawn for personal use. Increase in withdrawal decreases cash. As such Drawing account is debited.
On November 1, amount is reimbursed for mileage. Mileage is an expense and increase in expense is debited.
On November 2, payment for the services rendered to L Corporation worth $4,633 has been received thereby reducing accounts receivables (asset) by $4,633. However, another asset (Cash) is increased by $4,633.
On November 5, computer supplies are purchased for cash.
On November 8, payment has not been received for the services rendered to Gomez Co. thereby increasing the accounts receivable account by $5,668.
On November 18, payment for the services rendered to IFM Corporation worth $2,208 has been received thereby reducing accounts receivables (asset) by $2,208. However, another asset (Cash) is increased by $2,208.
On November 22, Cash is paid on general administrative expense. Miscellaneous expenses are an expense and increase in expense is debited.
On November 24, payment has not been received for the services rendered to Alex’s Engineering Co. thereby increasing the accounts receivable account by $3,950.
No entry is needed for the transaction on November 25th regarding the bill sent to IFM for the past payment of $3,000 due as this is just a reminder to make the payment.
On November 28, amount is reimbursed for mileage. Mileage is an expense and increase in expense is debited.
On November 30, wages were paid. Wages is an expense and increase in expense is debited.
On November 30, Cash is withdrawn for personal use. Increase in withdrawal decreases cash. As such Drawing account is debited.
Requirement 2:
To Determine:
Ledger Accounts to post the above Journal Entries
Requirement 2:
Explanation of Solution
Explanation:
The journal entries mentioned above can be summarized using balance column format. Following are the different general ledger accounts:
Cash
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.1 | 45,000 | 45,000 | ||
| Oct.2 | 3,300 | 41,700 | ||
| Oct.5 | 2,220 | 39,480 | ||
| Oct.8 | 1,420 | 38,060 | ||
| Oct.15 | 4,800 | 42,860 | ||
| Oct.17 | 805 | 42,055 | ||
| Oct.20 | 1,728 | 40,327 | ||
| Oct.22 | 1,400 | 41,727 | ||
| Oct.31 | 875 | 40,852 | ||
| Oct.31 | 3,600 | 37,252 | ||
| Nov.1 | 320 | 36,932 | ||
| Nov.2 | 4,633 | 41,565 | ||
| Nov.5 | 1,125 | 40,440 | ||
| Nov.18 | 2,208 | 42,648 | ||
| Nov.22 | 250 | 42,398 | ||
| Nov.28 | 384 | 42,014 | ||
| Nov.30 | 1,750 | 40,264 | ||
| Nov.30 | 2,000 | 38,264 |
Accounts Receivable
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.6 | 4,800 | 4,800 | ||
| Oct.12 | 1,400 | 6,200 | ||
| Oct.15 | 4,800 | 1,400 | ||
| Oct.22 | 1,400 | 0 | ||
| Oct.28 | 5,208 | 5,208 | ||
| Nov.8 | 5,668 | 10,876 | ||
| Nov.18 | 2,208 | 8,668 | ||
| Nov.24 | 3,950 | 12,618 |
Computer Supplies
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.3 | 1,420 | 1,420 | ||
| Nov.5 | 1,125 | 2,545 |
Prepaid Insurance
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.3 | 2,220 | 2,220 |
Prepaid Rent
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.2 | 3,300 | 3,300 |
Office Equipment
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.1 | 8,000 | 8,000 |
Computer Equipment
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.1 | 20,000 | 20,000 |
Accounts Payable
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.3 | 1,420 | 1,420 | ||
| Oct.8 | 1,420 | 0 |
Capital
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.1 | 73,000 | 73,000 |
Drawings
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.31 | 3,600 | 3,600 | ||
| Nov.30 | 2,000 | 5,600 |
Computer Services Revenue
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.6 | 4,800 | 4,800 | ||
| Oct.12 | 1,400 | 6,200 | ||
| Oct.28 | 5,208 | 11,408 | ||
| Nov.2 | 4,633 | 16,041 | ||
| Nov.28 | 5,668 | 21,709 | ||
| Nov.24 | 3,950 | 25,659 |
Wages Expense
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.31 | 875 | 875 | ||
| Nov.30 | 1,750 | 2,625 |
Advertising Expense
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.20 | 1,728 | 1,728 |
Mileage Expense
| Date (2015) | PR | Debit | Credit | Balance |
| Nov.1 | 320 | 320 | ||
| Nov.28 | 384 | 704 |
Miscellaneous Expenses
| Date (2015) | PR | Debit | Credit | Balance |
| Nov.22 | 250 | 250 |
Repairs Expenses
| Date (2015) | PR | Debit | Credit | Balance |
| Oct.17 | 805 | 805 |
Requirement 3:
To Determine:
Requirement 3:
Explanation of Solution
Explanation:
- Business Solutions
Trial Balance
At November 30, 2015
| Particulars | Debit ($) | Credit ($) |
| Cash | 38,264 | |
| Supplies | 2,545 | |
| Equipment | 8,000 | |
| Account Receivables | 12,618 | |
| Prepaid Rent | 3,300 | |
| Prepaid Insurance | 2,220 | |
| Computer Equipment | 20,000 | |
| Accounts Payable | 0 | |
| Capital | 73,000 | |
| Drawings | 5,600 | |
| Wage Expenses | 2,625 | |
| Advertisement | 1,728 | |
| Mileage Expense | 704 | |
| Misc. Expenses | 250 | |
| Repair | 805 | |
| Service Revenue | 25,659 | |
| Total | 98,659 | 98,659 |
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