Chapter 3, Problem 3.7EYCT

(a)

To determine

Journal:

Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

Net income:

The net income is the difference between the total revenue, and the total expenses. The net income can be computed as:

$$

$\boxed{\text{Net}\text{income = Total revenues – Total expenses}}$

To prepare: The correct journal entry for S incorporation.

(b)

To determine

The incorrect entries that would prevent the trial balance from balancing.

(c)

To determine

To compute: The correct net income for the month of May.

(d)

To determine

The correct cash balance at May, 31.