Chapter 3, Problem 4PB

Leander’s Landscaping Service maintains the following chart of accounts:

The following transactions were completed by Leander:

Required

1. 1. Journalize the transactions in the general journal. Prepare 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.
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 April 30, 20–.

*If you are using CLGL, use the year 2020 when recording transactions 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 April 1:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	1	Cash		111	30,000
			OL, Capital	311		30,000
		(Record cash invested in the business by OL)

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.
• ■ OL, 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 April 4:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	4	Equipment		124	1,750
			OL, Capital	311		1,750
		(Record equipment invested in the business by OL)

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 April 6:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	6	Equipment		124	1,450
			Accounts Payable	221		1,450
		(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 April 7:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	7	Rent Expense		512	925
			Cash	111		925
		(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 April 9:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	9	Equipment		124	5,100
			Cash	111		2,100
			Accounts Payable	221		3,000
		(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 April 10:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
April	10	Prepaid Insurance		117	2,800
			Cash	111		2,800
		(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 April 13:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
April	13	Accounts Receivable		113	4,595
			Landscaping Income	411		4,595
		(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 April 14:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	14	Supplies		115	427
			Accounts Payable	411		427
		(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 April 15:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
April	15	Accounts Receivable		113	3,997
			Landscaping Income	411		3,997
		(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 April 17:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	17	Gas and Oil Expense		513	227
			Cash	111		227
		(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 April 19:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
April	19	Cash		111	1,437
			Landscaping Income	411		1,437
		(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 April 22:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	22	Accounts Payable		221	450
			Cash	111		450
		(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 April 24:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	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 April 28:

Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
April	28	Accounts Receivable		113	1,785
			Landscaping Income	411		1,785
		(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 April 29:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	29	Utilities Expense		514	321
			Cash	111		321
		(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 April 30:

Date		Account Titles and Explanations		Post. Ref.	Debit ($)	Credit ($)
April	30	Salary Expense		511	1,836
			Cash	111		1,836
		(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 April 30:

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

Table (17)

Description:

• ■ OL, 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, OL before the capital and drawings terms and name those accounts as OL, Capital account and OL, 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 ($)	Credit ($)
April	1		1	30,000		30,000
	7		1		925	29,075
	9		1		2,100	26,975
	10		1		2,800	24,175
	17		1		227	23,948
	19		1	1,437		25,385
	22		1		450	24,935
	24		1	800		25,735
	29		1		321	25,414
	30		1		1,836	23,578
	30		1		1,500	22,078

Table (18)

ACCOUNT    Accounts Receivable                                                 ACCOUNT NO. 113
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	13		1	4,595		4,595
	15		1	3,997		8,592
	24		1		800	7,792
	28		1	1,785		9,577

Table (19)

ACCOUNT    Supplies                                                                     ACCOUNT NO. 115
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	14		1	427		427

Table (20)

ACCOUNT    Prepaid Insurance                                                      ACCOUNT NO. 117
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	10		1	2,800		2,800

Table (21)

ACCOUNT    Equipment                                                                  ACCOUNT NO. 124
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	4		1	1,750		1,750
	6		1	1,450		3,200
	9		1	5,100		8,300

Table (22)

ACCOUNT    Accounts Payable                                                      ACCOUNT NO. 221
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	6		1		1,450		1,450
	9		1		3,000		4,450
	14		1		427		4,877
	22		1	450			4,427

Table (23)

ACCOUNT    OL, Capital                                                                ACCOUNT NO. 311
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	1		1		30,000		30,000
	4		1		1,750		31,750

Table (24)

ACCOUNT    OL, Drawing                                                              ACCOUNT NO. 312
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	30		1	1,500		1,500

Table (25)

ACCOUNT    Landscaping Income                                                  ACCOUNT NO. 411
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	13		1		4,595		4,595
	15		1		3,997		8,592
	19		1		1,437		10,029
	28		1		1,785		11,814

Table (26)

ACCOUNT    Salary Expense                                                          ACCOUNT NO. 511
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	30		1	1,836		1,836

Table (27)

ACCOUNT    Rent Expense                                                             ACCOUNT NO. 512
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	7		1	925		925

Table (28)

ACCOUNT    Gas and Oil Expense                                                 ACCOUNT NO. 513
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	17		1	227		227

Table (29)

ACCOUNT    Utilities Expense                                                        ACCOUNT NO. 514
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
April	29		1	321		321

Table (30)

To determine

Prepare the trial balance for L’s Landscaping Service as at April 301, 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 April 30, 20--.

L’s Landscaping Service
Trial Balance
April 30, 20--
Account Title	Debit ($)	Credit ($)
Cash	$22,078
Accounts Receivable	9,577
Supplies	427
Prepaid Insurance	2,800
Equipment	8,300
Accounts Payable		$4,427
JL, Capital		31,750
JL, Drawing	1,500
Landscaping Income		11,814
Salary Expense	1,836
Rent Expense	925
Gas and Oil Expense	227
Miscellaneous Expense	321
Total	$47,991	$47,991

Table (31)

Conclusion

Hence, the debit and credit total of trial balance of L’s Landscaping Service at April 30, 20-- is $47,991.