Chapter 3, Problem 4PA

Lara’s Landscaping Service has the following chart of accounts:

The following transactions were completed by Lara’s Landscaping Service:

Required

1. 1. Journalize the transactions in the general journal. Provide a brief explanation for each entry.
2. 2. If you are using working papers, write the name of the owner on the Capital and Drawing accounts. (Skip this step if you are using CLGL.)
3. 3. Post the journal entries to the general ledger accounts. (Skip this step if you are using CLGL.)
4. 4. Prepare a trial balance dated March 31, 20–.

*If you are using CLGL, use the year 2020 when recording transaction! and preparing reports.

To determine

Prepare journal entries for the given transactions.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

• ■ Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• ■ Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entries for the given transactions.

Transaction on March 1:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	1	Cash		111	35,000
			JL, Capital	311		35,000
		(Record cash invested in the business by JL)

Table (1)

Description:

• ■ Cash is an asset account. Since cash is invested in the business, asset account increased, and an increase in asset is debited.
• ■ JL, Capital is an equity account. Since cash is contributed as capital by the owner, equity value increased, and an increase in equity is credited.

Transaction on March 4:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	4	Equipment		124	1,325
			JL, Capital	311		1,325
		(Record equipment invested in the business by JL)

Table (2)

Description:

• ■ Equipment is an asset account. Since equipment is invested in the business, asset account increased, and an increase in asset is debited.
• ■ JL, Capital is an equity account. Since equipment is contributed as capital by the owner, equity value increased, and an increase in equity is credited.

Transaction on March 6:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	6	Equipment		124	915
			Accounts Payable	221		915
		(Record purchase of equipment)

Table (3)

Description:

• ■ Equipment is an asset account. Since equipment is bought, asset account increased, and an increase in asset is debited.
• ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 7:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	7	Rent Expense		512	950
			Cash	111		950
		(Record payment of rent expense)

Table (4)

Description:

• ■ Rent Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 9:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	9	Equipment		124	5,300
			Cash	111		3,000
			Accounts Payable	221		2,300
		(Record purchase of equipment)

Table (5)

Description:

• ■ Equipment is an asset account. Since equipment is bought, asset account increased, and an increase in asset is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
• ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 10:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
March	10	Prepaid Insurance		117	1,800
			Cash	111		1,800
		(Record payment of insurance in advance)

Table (6)

Description:

• ■ Prepaid Insurance is an asset account. Since insurance is paid in advance, it is recorded as asset until it is consumed. So, asset value is increased, and an increase in asset is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 13:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
March	13	Accounts Receivable		113	2,832
			Landscaping Income	411		2,832
		(Record services performed on account)

Table (7)

Description:

• ■ Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• ■ Landscaping Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Landscaping Income account is credited.

Transaction on March 14:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	14	Supplies		113	380
			Accounts Payable	411		380
		(Record supplies bought on account)

Table (8)

Description:

• ■ Supplies is an asset account. Since store supplies are bought, asset account increased, and an increase in asset is debited.
• ■ Accounts Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Transaction on March 15:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
March	15	Accounts Receivable		113	2,832
			Landscaping Income	411		2,832
		(Record services performed on account)

Table (9)

Description:

• ■ Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• ■ Landscaping Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Landscaping Income account is credited.

Transaction on March 17:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	17	Gas and Oil Expense		513	180
			Cash	111		180
		(Record payment of oil and gas expense)

Table (10)

Description:

• ■ Gas and Oil Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 19:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
March	19	Cash		111	1,864
			Landscaping Income	411		1,864
		(Record revenue earned and received)

Table (11)

Description:

• ■ Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• ■ Landscaping Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Landscaping Income account is credited.

Transaction on March 22:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	22	Accounts Payable		221	500
			Cash	111		500
		(Record cash paid on account)

Table (12)

Description:

• ■ Accounts Payable is a liability account. Since the payable decreased, the liability decreased, and a decrease in liability is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 24:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	24	Cash		111	800
			Accounts Receivable	113		800
		(Record cash received on account)

Table (13)

Description:

• ■ Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• ■ Accounts Receivable is an asset account. Since amount to be received has decreased, asset account decreased, and a decrease in asset is credited.

Transaction on March 28:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
March	28	Accounts Receivable		113	1,400
			Landscaping Income	411		1,400
		(Record services performed on account)

Table (14)

Description:

• ■ Accounts Receivable is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
• ■ Landscaping Income is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Landscaping Income account is credited.

Transaction on March 29:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	29	Utilities Expense		514	260
			Cash	111		260
		(Record payment of utilities expense)

Table (15)

Description:

• ■ Utilities Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 30:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	30	Salary Expense		511	1,850
			Cash	111		1,850
		(Record payment of salary expense)

Table (16)

Description:

• ■ Salary Expense is an expense account. An increase in expense reduces the equity value, and a decrease in equity is debited.
• ■ Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.

Transaction on March 31:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
March	31	JL, Drawing		312	1,500
			Cash	111		1,500
		(Record cash withdrawn by JL for personal use)

Table (17)

Description:

• ■ JL, Drawing is a contra-capital account. The contra-capital accounts decrease the equity value, and a decrease in equity is debited.
• ■ Cash is an asset account. Since cash is withdrawn, asset account decreased, and a decrease in asset is credited.

To determine

Indicate the names of owner above the Capital and Drawing accounts.

Explanation of Solution

Owners’ equity: The financial interest of the owners to invest in the business is referred to as owners’ equity or capital. Owners’ equity comprises of capital, drawings, revenues and expenses.

Write the name of owner, JL before the capital and drawings terms and name those accounts as JL, Capital account and JL, Drawing account.

To determine

Post the journalized transactions in the ledger accounts.

Explanation of Solution

Ledger: Ledger is a book in which the accounts are summarized and grouped from the transactions recorded in the journal.

Post the journalized transactions in the ledger accounts.

ACCOUNT    Cash                                                                           ACCOUNT NO. 111
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	1		1	35,000		35,000
	7		1		950	34,050
	9		1		3,000	31,050
	10		1		1,800	29,250
	17		1		180	29,070
	19		1	1,864		30,934
	22		1		500	30,434
	24		1	800		31,234
	29		1		260	30,974
	30		1		1,850	29,124
	31		1		1,500	27,624

Table (18)

ACCOUNT    Accounts Receivable                                                 ACCOUNT NO. 113
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	13		1	3,895		3,895
	15		1	2,832		6,727
	24		1		800	5,927
	28		1	1,830		7,757

Table (19)

ACCOUNT    Supplies                                                                     ACCOUNT NO. 115
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	14		1	380		380

Table (20)

ACCOUNT    Prepaid Insurance                                                      ACCOUNT NO. 117
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	10		1	1,800		1,800

Table (21)

ACCOUNT    Equipment                                                                  ACCOUNT NO. 124
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	4		1	1,325		1,325
	6		1	915		2,240
	9		1	5,300		7,540

Table (22)

ACCOUNT    Accounts Payable                                                      ACCOUNT NO. 221
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	6		1		915		915
	9		1		2,300		3,215
	14		1		380		3,595
	22		1	500			3,095

Table (23)

ACCOUNT    JL, Capital                                                                  ACCOUNT NO. 311
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	1		1		35,000		35,000
	4		1		1,325		36,325

Table (24)

ACCOUNT    JL, Drawing                                                               ACCOUNT NO. 312
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	31		1	1,500		1,500

Table (25)

ACCOUNT    Landscaping Income                                                  ACCOUNT NO. 411
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	13		1		3,895		3,895
	15		1		2,832		6,727
	19		1		1,864		8,591
	28		1		1,830		10,421

Table (26)

ACCOUNT    Salary Expense                                                          ACCOUNT NO. 511
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	30		1	1,850		1,850

Table (27)

ACCOUNT    Rent Expense                                                             ACCOUNT NO. 512
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	7		1	950		950

Table (28)

ACCOUNT    Gas and Oil Expense                                                 ACCOUNT NO. 513
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	17		1	180		180

Table (29)

ACCOUNT    Utilities Expense                                                        ACCOUNT NO. 514
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
March	29		1	260		260

Table (30)

To determine

Prepare the trial balance for L’s Landscaping Service as at March 31, 20--.

Explanation of Solution

Trial balance: Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Prepare the trial balance for L’s Landscaping Service as at March 31, 20--.

L’s Landscaping Service
Trial Balance
March 31, 20--
Account Title	Debit ($)	Credit ($)
Cash	$27,624
Accounts Receivable	7,757
Supplies	380
Prepaid Insurance	1,800
Equipment	7,540
Accounts Payable		$3,095
JL, Capital		36,325
JL, Drawing	1,500
Landscaping Income		10,421
Salary Expense	1,850
Rent Expense	950
Gas and Oil Expense	180
Miscellaneous Expense	260
Total	$49,841	$49,841

Table (31)

Conclusion

Hence, the debit and credit total of trial balance of L’s Landscaping Service at March 31, 20-- is 49,841.