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Business Accounting Loose-Leaf for Financial and Managerial Accounting

Journal Entry : It means record of financial data related to business transactions in a journal in a manner so that debit equals credit. It provides an audit trail to the auditor and a means to analyze the effects of transactions to an organization‘s financial health. Rules of Journal Entry: The rules for journal entry are defined by 5 accounting components, Assets: Increase in asset should be debit and decrease should be credit. Liabilities: Increase in liabilities should be credit and decrease should be debit. Equity: Increase in Equity should be credit and decrease should be debit. Expense: Increase in expense should be debit and decrease should be credit. Revenue: Increase in revenue should be credit and decrease should be debit. Credit Card: It refers to the card made of plastic and issued by a bank. It provides an individual to buy goods and services on credit when they have shortage of cash. Perpetual Inventory System: It refers to the system of recording transaction related to inventories at the time of their occurrence. Each sale and purchase is recorded at the time they occurred. To prepare: Journal entries for the given store credit card sales transactions. Solution: Apr 30 sold merchandise for $1,000 (that had cost $650) and accepted the customer‘s store credit card. Date Account Title and Explanation Post ref Debit($) Credit($) Apr 30 Accounts Receivable 1,000 Sales 1,000 (Being sale of goods on store credit card is recorded ) Since sale of store credit allows customers of the store to buy the goods on credit and pay for them later, they are considered as accounts receivable which is an asset account. So, accounts receivable is debited as it is increased. Since sale of goods has been made which will increase the sales accounts which is a revenue account, it is credited when it is increased. Date Account Title and Explanation Post ref Debit($) Credit($) Apr 30 Cost of Goods Sold 650 Merchandise Inventory 650 (Being cost of goods sold is recorded ) Since the cost of merchandise sold is $650 and company is using perpetual inventory system, it is debited as it is an expense account and increase in expense is always debited. Since merchandise inventory account is an asset account and it has decreased, so, it is credited May 31 recorded $4 of interest earned from its store credit cards as of this month end. Date Account Title and Explanation Post ref Debit($) Credit($) May 31 Accounts Receivable 4 Interest Revenue 4 (Being interest on store credit card for one month is recorded ) Since the interest charged by the store on the store credit card will increase the value of accounts receivable and accounts receivable is an asset account, it is debited when it is increased. Since the interest charged by the store on the store card will increase the revenue of the company for interest, it is credited when it is increased.

Journal Entry : It means record of financial data related to business transactions in a journal in a manner so that debit equals credit. It provides an audit trail to the auditor and a means to analyze the effects of transactions to an organization‘s financial health. Rules of Journal Entry: The rules for journal entry are defined by 5 accounting components, Assets: Increase in asset should be debit and decrease should be credit. Liabilities: Increase in liabilities should be credit and decrease should be debit. Equity: Increase in Equity should be credit and decrease should be debit. Expense: Increase in expense should be debit and decrease should be credit. Revenue: Increase in revenue should be credit and decrease should be debit. Credit Card: It refers to the card made of plastic and issued by a bank. It provides an individual to buy goods and services on credit when they have shortage of cash. Perpetual Inventory System: It refers to the system of recording transaction related to inventories at the time of their occurrence. Each sale and purchase is recorded at the time they occurred. To prepare: Journal entries for the given store credit card sales transactions. Solution: Apr 30 sold merchandise for $1,000 (that had cost $650) and accepted the customer‘s store credit card. Date Account Title and Explanation Post ref Debit($) Credit($) Apr 30 Accounts Receivable 1,000 Sales 1,000 (Being sale of goods on store credit card is recorded ) Since sale of store credit allows customers of the store to buy the goods on credit and pay for them later, they are considered as accounts receivable which is an asset account. So, accounts receivable is debited as it is increased. Since sale of goods has been made which will increase the sales accounts which is a revenue account, it is credited when it is increased. Date Account Title and Explanation Post ref Debit($) Credit($) Apr 30 Cost of Goods Sold 650 Merchandise Inventory 650 (Being cost of goods sold is recorded ) Since the cost of merchandise sold is $650 and company is using perpetual inventory system, it is debited as it is an expense account and increase in expense is always debited. Since merchandise inventory account is an asset account and it has decreased, so, it is credited May 31 recorded $4 of interest earned from its store credit cards as of this month end. Date Account Title and Explanation Post ref Debit($) Credit($) May 31 Accounts Receivable 4 Interest Revenue 4 (Being interest on store credit card for one month is recorded ) Since the interest charged by the store on the store credit card will increase the value of accounts receivable and accounts receivable is an asset account, it is debited when it is increased. Since the interest charged by the store on the store card will increase the revenue of the company for interest, it is credited when it is increased.

Loose-Leaf for Financial and Managerial Accounting

Loose-Leaf for Financial and Managerial Accounting

7th Edition

ISBN: 9781260004861

Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher: McGraw-Hill Education

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Chapter 7 Solutions

Loose-Leaf for Financial and Managerial Accounting

Ch. 7 - Prob. 1MCQ Ch. 7 - Prob. 2MCQ Ch. 7 - Prob. 3MCQ Ch. 7 - Prob. 4MCQ Ch. 7 - Prob. 5MCQ Ch. 7 - Prob. 1DQ Ch. 7 - Prob. 2DQ Ch. 7 - Prob. 3DQ Ch. 7 - Prob. 4DQ Ch. 7 - Prob. 5DQ

Ch. 7 - Prob. 6DQ Ch. 7 - Prob. 7DQ Ch. 7 - Prob. 8DQ Ch. 7 - Prob. 9DQ Ch. 7 - Prob. 10DQ Ch. 7 - Prob. 1QS Ch. 7 - Prob. 2QS Ch. 7 - Prob. 3QS Ch. 7 - QS 7-4 Distinguishing between allowance method and...Ch. 7 - QS 7-5 Allowance method for bad debts P2 Gomez...Ch. 7 - Percent of accounts receivable method P3 Warner...Ch. 7 - Prob. 7QS Ch. 7 - Prob. 8QS Ch. 7 - Prob. 9QS Ch. 7 - Prob. 10QS Ch. 7 - Prob. 11QS Ch. 7 - Prob. 12QS Ch. 7 - Prob. 13QS Ch. 7 - Prob. 1E Ch. 7 - Prob. 2E Ch. 7 - Prob. 3E Ch. 7 - Prob. 4E Ch. 7 - Prob. 5E Ch. 7 - Prob. 6E Ch. 7 - Prob. 7E Ch. 7 - Exercise 7-8 Percent of receivables method P3...Ch. 7 - Prob. 9E Ch. 7 - Prob. 10E Ch. 7 - Prob. 11E Ch. 7 - Prob. 12E Ch. 7 - Prob. 13E Ch. 7 - Exercise 7-14 Dishonoring a note P4 Prepare...Ch. 7 - Prob. 15E Ch. 7 - Prob. 16E Ch. 7 - Prob. 17E Ch. 7 - Prob. 1PSA Ch. 7 - Prob. 2PSA Ch. 7 - Prob. 3PSA Ch. 7 - Prob. 4PSA Ch. 7 - Prob. 5PSA Ch. 7 - Prob. 1PSB Ch. 7 - Prob. 2PSB Ch. 7 - Prob. 3PSB Ch. 7 - Prob. 4PSB Ch. 7 - Prob. 5PSB Ch. 7 - Prob. 7SP Ch. 7 - Prob. 1GLP Ch. 7 - Prob. 1BTN Ch. 7 - Prob. 2BTN Ch. 7 - Anton Blair is the manager of a medium-size...Ch. 7 - Prob. 4BTN Ch. 7 - Prob. 5BTN Ch. 7 - Prob. 6BTN Ch. 7 - Prob. 7BTN Ch. 7 - Prob. 8BTN Ch. 7 - Prob. 9BTN

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