Chapter 5, Problem 10Q

(a)

To determine

The Process of Recording: The process of accounting can be defined as a series of activities, which are initiated at the opening of a transaction and accomplished with the closing of books. The series of activities involves identification, recording, and communication. The first step in the recording process is analyzing each transaction in terms of its effects on the accounts. The accounts are identified for debit and credit. The second step in the recording process is to record the information related to the transaction in a journal. The last step in the process is to post the information recorded in the journal to the respective account in the ledger.

Journal Entry: A journal entry refers to the recording of a transaction into accounting journal items. The journal entry consists of different recordings, each of which is a debit or credit. The first step in the accounting process is analyzing the transactions and recording them as journal entries.

Procedure for debiting and crediting an account:

• Increase in assets account, increase in expenses account, and decrease in liabilities account should be debited.
• Decrease in assets account, increase in revenue account, and increase in liabilities account should be credited.

All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

$\boxed{\text{Asset = Liabilities + Stockholders' equity}}$

The primary source document for recording cash sales and credit sales, stated as (1) and (2).

(b)

To determine

To prepare: The journal entries for cash sales and credit sales.