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 T are as follows: November, 1 – Issuance of common stock: Date Accounts Post Ref. Debit ($) Credit ($) November, 1 Cash 70,000 Common stock 70,000 (To record the issuance of common stock) Table (1) Cash is an assets account and it increased the value of asset by $70,000. Hence, debit the cash account for $70,000. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $70,000, Hence, credit the common stock for $70,000. November, 3 – Office supplies purchased in cash: Date Accounts Post Ref. Debit ($) Credit ($) November, 3 Supplies 275 Cash 275 (To record office supplies purchased in cash) Table (2) Supplies are an assets account and it increased the value of asset by $275. Hence, debit the supplies account for $275. Cash is an assets account and it decreased the value of asset by $275. Hence, credit the cash account for $275. November, 8 – Land purchased in cash: Date Accounts Post Ref. Debit ($) Credit ($) November, 8 Land 34,000 Cash 34,000 (To record purchase of land in cash) Table (3) Land is an assets account and it increased the value of asset by $34,000. Hence, debit the land account for $34,000. Cash is an assets account and it decreased the value of asset by $34,000. Hence, credit the cash account for $34,000. November, 12 – Office equipment purchased on account: Date Accounts Post Ref. Debit ($) Credit ($) November, 12 Office equipment 3,300 Accounts payable 3,300 (To record purchase of office equipment on account) Table (4) Office equipment is an assets account and it increased the value of asset by $3,300. Hence, debit the office equipment account for $3,300. Accounts payable is a liability account and it increased the value of liability by $3,300. Hence, credit the liability account by $3,300. November, 17 – Cash borrowed from bank: Date Accounts Post Ref. Debit ($) Credit ($) November, 17 Cash 50,000 Notes payable 50,000 (To record cash borrowed from bank) Table (5) Cash is an assets account and it increased the value of asset by $50,000...

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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