Chapter 3, Problem 3.21E

(a)

To determine

Introduction:

Journal Entry: Journalizing is the recording process of transactions in the book of original entries. It gives an entire picture of a business transaction. It is recorded in chronological order. It is the pre-stage for the preparation of ledgers.

Adjusting Entries: Adjusting entries are the entries that are recorded by the corporation to changes its accounting records into the accruals concepts. Before issuing the financial statement, the corporation is required to adjust the income statement and balance sheet is updated on the accrual concept.

T- account: It is the account or graphical demonstration of general ledger account or its entries. The left side of T-account and the right side represents as debit and credit side respectively. The journal entries recorded and posted to T-accounts. In the T-account of assets, the journal entries which raise the balance of asset are debited in the T-account.

Rules of debit and credit:

All the items mentioned in the income statement and balance sheet are presented by journalizing the accounts, then classifying them into ledgers and afterward resulted in the summarized income statement and balance sheet.

For journalizing the various accounts, rules of debit and credit has been followed according to the category of the account. There are five categories of accounts:

Assets: It can be explained as the resources which are owned and controlled by the organization and which are capable of providing some benefits in future for working the core business of the organization. Whenever any asset has been purchased or any transaction which raises the amount of asset, the asset account will be debited.

Liabilities: These are referred as Company’s financial commitment arising during the course of Business Cycle, which will be complete by the outflow of Resources. Whenever any transaction increases the amount of liability, the liability account will be credited.

Revenues: It is income that an entity earns from its normal business operations. It reflects the amount which is received by the firm by manufacturing or providing goods and services. Whenever income has been earned or due, the revenue account will be credited.

Expenses: These are the gross outflows incurred by a business entity while carrying out their regular business operations like manufacturing and providing goods and services. Whenever any expense has been due to be incurred, the expense account has been debited.

Capital account: This account represents the balance of amount invested by the stockholders. It also includes the earnings which are due and not withdrawn by the stockholders. Whenever any transaction increases the amount of capital, the capital account will be credited.

To journalize and prepare: The transactions occurred during the period of January of the current year for Company C.

(b)

To determine

To journalize and prepare: The adjustments required at the end of the period of January of the current year for Company C.

(c)

To determine

The T-accounts prepared are to be finalized in order to compute the ending balance.