Chapter 4, Problem 2PA

On October 1, 2019, Helen Kennedy opened an advertising agency. She plans to use the chart of accounts listed below.

INSTRUCTIONS

1.    Journalize the transactions. Number the journal page 1, write the year at the top of the Date column, and include a description for each entry.

2.    Post to the ledger accounts. Before you start the posting process, open accounts by entering account names and numbers in the headings. Follow the order of the accounts in the chart of accounts.

ASSETS

101 Cash

111 Accounts Receivable

121 Supplies

141 Office Equipment

151 Art Equipment

LIABILITIES

202 Accounts Payable

OWNER’S EQUITY

301 Helen Kennedy, Capital

302 Helen Kennedy, Drawing

REVENUE

401 Fees Income

EXPENSES

511 Office Cleaning Expense

514 Rent Expense

517 Salaries Expense

520 Telephone Expense

523 Utilities Expense

Analyze: What is the balance of account 202 in the general ledger?

To determine

Journalize the given transaction.

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: A debit, is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.

Credit: A credit, is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
• Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.

Pass the journal entries for the given transactions:

	General Journal			Page - 1
Date	Description	Post	Debit	Credit
2019
October 1	Cash	101	$70,000
	HK Capital	301		$70,000
	(To record the receipt of capital)
October 2	Rent expense	514	$4,000
	Cash	101		$4,000
	(To record the payment of rent, Check 1001)

Table (1)

	General Journal			Page - 2
Date	Description	Post	Debit	Credit
2019
October 5	Office Equipment	141	$18,000
	Accounts payable	202		$18,000
	(To record the purchase of office equipment on account Invoice 6704)
October 6	Art Equipment	151	$4,100
	Cash	101		$4,100
	(To record the purchase of art equipment for cash, Check 1002)
October 7	Supplies	121	$1,670
	Cash	101		$1,670
	(To record the purchase of supplies for cash, Check 1003)
October 10	Office Cleaning Expense	511	$8,00
	Cash	101		$8,00
	(To record the payment of office cleaning expense, Check 1004)
October 12	Cash	101	$4,200
	Accounts receivable	111	$1,800
	Fees Income	401		$6,000
	(To record the services provided for cash and on account)
October 15	Cash	101	$300
	Supplies	121		$300
	(To record the return of damaged supplies for cash refund)
October 18	Office Equipment	141	$3,000
	Cash	101		$1,750
	Accounts payable	202		$1,250
	(To record the services provided for cash and on account)

Table (2)

	General Journal			Page - 3
Date	Description	Post	Debit	Credit
2019
October 20	Accounts payable	202	$9,500
	Cash	101		$9,500
	(To record the payment for office supplies, Invoice 5103 by Check 206)
October 26	Accounts receivable	111	$4,800
	Fees income	401		$4,800
	(To record the service provided on account)
October 27	Telephone expense	520	$375
	Cash	101		$375
	(To record the payment of telephone bill, Check 1007)
October 30	Cash	101	$4,200
	Accounts receivable	111		$4,200
	(To record the receipt of fees)
	Utilities expense	523	$1,080
	Cash	101		$1,080
	(To record the payment of utility bill, Check 1008)
	Salaries expense	517	$9,000
	Cash	101		$9,000
	(To record the payment of salaries, Checks 1009-1011)

Table (3)

To determine

Post the journal entries in the General Ledger and identify the balance in the Account 202.

Explanation of Solution

General ledger:

General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements. In the ledger all the entries are recorded in the account order, for which the transactions actually take place.

Post the journal entries in the General Ledger:

GENERAL LEDGER
ACCOUNT: Cash					Account No.: 101
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 1		J1	$ 70,000		$ 70,000
October 2		J1		$ 4,000	$ 66,000
October 6		J2		$ 4,100	$ 61,900
October 7		J2		$ 1,670	$ 60,230
October 10		J2		$ 800	$ 59,430
October 12		J2	$ 4,200		$ 63,630
October 15		J2	$ 300		$ 63,930
October 18		J2		$ 1,750	$ 62,180
October 20		J2		$ 9,500	$ 52,680
October 27		J3		$ 375	$ 52,305
October 30		J3	$ 4,200		$ 56,505
October 30		J3		$ 1,080	$ 55,425
October 30		J3		$ 9,000	$ 46,425
ACCOUNT: Accounts receivable					Account No.: 111
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 12		J1	$ 1,800		$ 1,800
October 26		J3	$ 4,800		$ 6,600
October 30		J3		$ 4,200	$ 2,400

Table (4)

GENERAL LEDGER
ACCOUNT: Supplies					Account No.: 121
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 7		J2	$ 1,670		$ 1,670
October 15		J2		$ 300	$1,370
ACCOUNT: Office Equipment					Account No.: 141
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 5		J2	$ 18,000		$ 18,000
October 18		J2	$ 3,000		$ 21,000
ACCOUNT: Art Equipment					Account No.: 151
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 6		J2	$ 4,100		$ 4,100
ACCOUNT: Accounts payable					Account No.: 202
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 5		J2		$ 18,000		$ 18,000
October 18		J2		$ 1,250		$ 19,250
October 20		J3	$ 9,500			$ 9,750
ACCOUNT: HK Capital					Account No.: 301
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 1		J1		$ 70,000		$ 70,000
ACCOUNT: HK Drawings					Account No.: 302
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019

Table (5)

GENERAL LEDGER
ACCOUNT: Fees Income					Account No.: 401
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 18		J2		$ 6,000		$ 6,000
October 20		J3		$ 4,800		$ 10,800
ACCOUNT: Office Cleaning Expense					Account No.: 511
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 10		J2	$ 800		$ 800
ACCOUNT: Rent Expense					Account No.: 514
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 2		J1	$ 4,000		$ 4,000
ACCOUNT: Salaries Expense					Account No.: 517
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 30		J3	$ 9,000		$ 9,000
ACCOUNT: Telephone Expense					Account No.: 520
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 27		J3	$ 375		$ 375
ACCOUNT: Utilities Expense					Account No.: 523
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
October 30		J3	$ 1,080		$ 1,080

Table (6)

The Account 202 shows a credit balance of $9,750 at the end of the month.