Chapter 2, Problem 2SP

1.

Summary Introduction

Introduction: Expenses means the cash outflow from the organization and it is shown on the debit side of the company’s account. As expenses arise when any service or good is purchased, they do not cause a regular outflow of cash. Considering income and revenues refers to the credit balance in the company’s account. Assets of the company always have debit balance as it is owned by the company. To calculate: Journal entries, trial balance and general ledgers of the accounts.

Answer to Problem 2SP

All the journal entries required are maintained and the ledger of the accounts is maintained with trial balance.

Explanation of Solution

Date	Particulars	Debit ($)	Credit($)
Oct 1.	Cash	45,000
	Office Equipment	8,000
	Computer Equipment	20,000
	Common stock		73,000
	(Being cash and equipment invested by owner in stock)
Oct 2	Prepaid Rent	3,300
	Cash		3,300
	(Being 4 months advance paid)
Oct 3	Computer Supplies	1,420
	Accounts Payable		1,420
	(Being supply purchased on credit)
Oct 5	Prepaid Insurance	2,220
	Cash		2,220
	(Being 12 month premium paid in advance)
Oct 6	Accounts Receivable	4,800
	Computer Service Provider		4,800
	(Being customer billed for services)
Oct 8	Account Payable	1,420
	Cash		1,420
	(Being balance paid due on account payable)
Oct 12	Accounts Receivable	1,400
	Computer Services Revenue		1,400
	(Being customer billed for services)
Oct 15	Cash	4,800
	Accounts Receivables		4,800
	(Being account receivables collected)
Oct 17	Repairs Expense- Computer	805
	Cash		805
	(Being payment made for Computer repairs)
Oct 20	Advertising Expenses	1,728
	Cash		1,728
	(Being advertising expenses paid off)
Oct 22	Cash	1,400
	Account Receivables		1,400
	(Being Account receivable collected)
Oct 28	Accounts Receivables	5,208
	Computer Services revenue		5,208
	(Being customer billed for services)
Oct 31	Wages expenses	875
	Cash		875
	(Being Employee paid for part time work)
Oct 31	Dividends	3,600
	Cash		3,600
	(Being dividend paid off)
Nov 1	Mileage Expenses	320
	Cash		320
	(Being Mileage expenses reimbursed)
Nov 2	Cash	4,633
	Computer Service Revenue		4,633
	(Being cash collected from customer)
Nov 5	Computer Supplies	1,125
	Cash		1,125
	(Being computer supplies purchased)
Nov 8	Accounts Receivables	5,668
	Computer Service Revenue		5,668
	(Being customer billed for services)
Nov18	Cash	2,208
	Accounts receivable		2,208
	(Being Accounts receivable collected)
Nov 22	Miscellaneous Expenses	250
	Cash		250
	(Being donation recorded)
Nov 24	Accounts Receivables	3,950
	Computer Service Revenue		3,950
	(Being customer billed for services)
Nov 28	Mileage Expenses	384
	Cash		384
	(Being Mileage expenses reimbursed)
Nov 30	Wages expenses	1,750
	Cash		1,750
	(Being Employee paid for part time work)
Nov 30	Dividends	2,000
	Cash		2,000
	(Being dividend paid off)

2.

Summary Introduction

Introduction: Expenses means the cash outflow from the organization and it is shown on the debit side of the company’s account. As expenses arise when any service or good is purchased, they do not cause a regular outflow of cash. Considering income and revenues refers to the credit balance in the company’s account. Assets of the company always have debit balance as it is owned by the company.

To calculate: Journal entries, trial balance and general ledgers of the accounts.

Answer to Problem 2SP

All the journal entries required are maintained and the ledger of the accounts is maintained with trial balance.

Explanation of Solution

General Ledger Accounts

Date	Debit($)	Credit($)	Balance($)
Oct 1	4500		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

Account Receivable

Date	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 28	3,950		12,618

Computer Supplies

Date	Debit ($)	Credit($)	Balance($)
Oct 3	1,420		1,420
Nov 5	1,125		2,545

Prepaid Insurance

Date	Debit ($)	Credit($)	Balance($)
Oct 3	2,220		2,220

Prepaid Rent

Date	Debit ($)	Credit($)	Balance($)
Oct 2	3,330		3,330

Office Equipment

Date	Debit ($)	Credit($)	Balance($)
Oct 1	8,000		8,000

Computer Equipment

Date	Debit ($)	Credit($)	Balance($)
Oct 1	20,000		20,000

Account payable

Date	Debit ($)	Credit($)	Balance($)
Oct 3		1,420	1,420
Oct 8	1,420		0

Common Stock

Date	Debit ($)	Credit($)	Balance($)
Oct 1		73,000	73,000

Dividends

Date	Debit ($)	Credit($)	Balance($)
Oct 31	3,600		3,600
Nov 30	2,000		5,600

Computer Service Revenue

Date	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	Debit ($)	Credit($)	Balance($)
Oct 31	875		875
Nov 30	1,750		2,625

Advertising Expenses

Date	Debit ($)	Credit($)	Balance($)
Oct 30	1,728		1,728

Mileage Expenses

Date	Debit ($)	Credit($)	Balance($)
Nov 1	320		320
Nov 28	384		704

Miscellaneous Expenses

Date	Debit ($)	Credit($)	Balance($)
Nov 22	250		250

Repair expenses-Computer

Date	Debit ($)	Credit($)	Balance($)
Oct 17	805		805

3.

Summary Introduction

Introduction: Expenses means the cash outflow from the organization and it is shown on the debit side of the company’s account. As expenses arise when any service or good is purchased, they do not cause a regular outflow of cash. Considering income and revenues refers to the credit balance in the company’s account. Assets of the company always have debit balance as it is owned by the company. To calculate: Journal entries, trial balance and general ledgers of the accounts.

Answer to Problem 2SP

All the journal entries required are maintained and the ledger of the accounts is maintained with trial balance.

Explanation of Solution

Trial Balance (As on November 30)

Particulars	Debit	Credit
Cash	$38,264
Supplies	$2,545
Equipment	$8,000
Account Receivable	$12,618
Rent in Advance	$3,300
Prepaid Insurance	$2,220
Computer equipment	$20,000
Accounts payable		0
Common Stock		$73,000
Dividend Paid	$5,600
Wage Expenses	$2,625
Advertisement	$1,728
Mileage expenses	$704
Miscellaeous Expenses	$250
Repair	$805
Service revenue		$25,659
Total	$98,659	$98,659