Explanation Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system. 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 stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. Journal entries of Company A are as follows: June, 1 – Issuance of common stock: Date Accounts Post Ref. Debit ($) Credit ($) June, 1 Cash 95,000 Common stock 95,000 (To record the issuance of common stock) Table (1) Cash is an assets account and it increased the value of asset by $95,000. Hence, debit the cash account for $95,000. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $95,000, Hence, credit the common stock for $95,000. June, 3 – Office supplies purchased in cash: Date Accounts Post Ref. Debit ($) Credit ($) June, 3 Supplies 200 Cash 200 (To record office supplies purchased in cash) Table (2) Supplies are an assets account and it increased the value of asset by $200. Hence, debit the supplies account for $200. Cash is an assets account and it decreased the value of asset by $200. Hence, credit the cash account for $200. June, 8 – Land purchased in cash: Date Accounts Post Ref. Debit ($) Credit ($) June, 8 Land 38,000 Cash 38,000 (To record purchase of land in cash) Table (3) Land is an assets account and it increased the value of asset by $38,000. Hence, debit the land account for $38,000. Cash is an assets account and it decreased the value of asset by $38,000. Hence, credit the cash account for $38,000. June, 12 – Office equipment purchased on account: Date Accounts Post Ref. Debit ($) Credit ($) June, 12 Office equipment 3,500 Accounts payable 3,500 (To record purchase of office equipment on account) Table (4) Office equipment is an assets account and it increased the value of asset by $3,500. Hence, debit the office equipment account for $3,500. Accounts payable is a liability account and it increased the value of liability by $3,500. Hence, credit the liability account by $3,500. June, 17 – Cash borrowed from bank: Date Accounts Post Ref. Debit ($) Credit ($) June, 17 Cash 10,000 Notes payable 10,000 (To record cash borrowed from bank) Table (5 Cash is an assets account and it increased the value of asset by $10,000...

5th Edition

ISBN: 9780134728643

Author: Robert Kemp; Jeffrey Waybright

Publisher: Pearson Education (US)

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Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions.

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