Chapter D, Problem 1PSB

To determine

Concept introduction:

General Entries:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 1:

General journal entries to record transactions.

Answer to Problem 1PSB

General Journal
Date	Accounts Title & Explanation	PR	Debit	Credit
Sep. 1	Cash	101	$38,000
	Office Equipment	163	$15,000
	Common stock	307		$53,000
	(For recording investment of cash and office equipment in the company in exchange of common stock)
Sep. 2	Prepaid Rent	131	$9,000
	Cash	101		$9,000
	(For recording payment of rent for 12 months)
Sep. 4	Office Equipment	163	$8,000
	Office Supplies	124	$2,400
	Accounts Payable	201		$10,400
	(For recording credit purchase of office equipment and office supplies)
Sep. 8	Cash	101	$3,280
	Service Revenue	401		$3,280
	(For recording service revenue)
Sep. 12	Accounts Receivable	106	$15,400
	Service Revenue	401		$15,400
	(For recording completed services)
Sep. 13	Accounts Payable	201	$10,400
	Cash	101		$10,400
	(For recording payment to accounts receivable)
Sep. 19	Prepaid Insurance	128	$1,900
	Cash	101		$1,900
	(For recording prepaid insurance payment)
Sep. 22	Cash	101	$7,700
	Accounts Receivable	106		$7,700
	(For recording receipt of cash from the accounts receivable)
Sep. 24	Accounts Receivable	106	$2,100
	Service Revenue	401		$2,100
	(For recording completed services on credit)
Sep. 28	Dividends	319	$5,300
	Cash	101		$5,300
	(For recording payment of cash dividends)
Sep. 29	Office Supplies	124	$550
	Accounts Payable	201		$550
	(For recording office supplies on credit)
Sep. 30	Utilities Expense	690	$860
	Cash	101		$860
	(For recording payment of utility bill)

Explanation of Solution

General Journal
Date	Accounts Title & Explanation	PR	Debit	Credit
Sep. 1	Cash	101	$38,000
	Office Equipment	163	$15,000
	Common stock	307		$53,000
	(For recording investment of cash and office equipment in the company in exchange of common stock)
Sep. 2	Prepaid Rent	131	$9,000
	Cash	101		$9,000
	(For recording payment of rent for 12 months)
Sep. 4	Office Equipment	163	$8,000
	Office Supplies	124	$2,400
	Accounts Payable	201		$10,400
	(For recording credit purchase of office equipment and office supplies)
Sep. 8	Cash	101	$3,280
	Service Revenue	401		$3,280
	(For recording service revenue)
Sep. 12	Accounts Receivable	106	$15,400
	Service Revenue	401		$15,400
	(For recording completed services)
Sep. 13	Accounts Payable	201	$10,400
	Cash	101		$10,400
	(For recording payment to accounts receivable)
Sep. 19	Prepaid Insurance	128	$1,900
	Cash	101		$1,900
	(For recording prepaid insurance payment)
Sep. 22	Cash	101	$7,700
	Accounts Receivable	106		$7,700
	(For recording receipt of cash from the accounts receivable)
Sep. 24	Accounts Receivable	106	$2,100
	Service Revenue	401		$2,100
	(For recording completed services on credit)
Sep. 28	Dividends	319	$5,300
	Cash	101		$5,300
	(For recording payment of cash dividends)
Sep. 29	Office Supplies	124	$550
	Accounts Payable	201		$550
	(For recording office supplies on credit)
Sep. 30	Utilities Expense	690	$860
	Cash	101		$860
	(For recording payment of utility bill)

1. When investment is made in exchange of common stock, then cash account and office equipment account will be debited and common stock account will be credited because at the time of receipt, cash account and office equipment account need to be debited. Common stock is credited because it is a liability and liability need to be credited.

2. Prepaid rent is treated as asset that is why prepaid rent account is debited while cash account will be credited because cash is gone out from business.

3. Office equipment and office supplies both are assets that is why at the time of purchase these accounts will be debited while accounts payable account will be credited because it is a liability.

4. At the time of receipt, cash account will be debited because cash comes in to business while service revenue account will be credited because revenues need to be credited.

5. When services are performed on credit then accounts receivable account is debited and service revenue account is credited.

6. At the time of payment to accounts payable, accounts payable account will be debited because liability is decreased while cash account will be credited because cash is gone out the business.

7. When insurance premium is paid for next 12 months then prepaid insurance account will be debited because it is an asset account while cash account will be credited because cash is gone out from the business.

8. At the time of cash receipt from accounts receivable, cash account is debited because cash comes in to the business while accounts receivable account is credited because balance of account receivable is decreased.

9. When dividend is paid then dividend account will be debited because it is an expense while cash account will be crdited because cash is gone out from business.

10. When utility bill is paid then utilities expense account will be debited because it is an expense while cash account will be credited because cash is gone out from the business.

To determine

Concept introduction:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 2:

Ledger accounts.

Answer to Problem 1PSB

Cash Account No. 101
Date	PR	Debit	Credit	Balance
September 1	G1	$38,000		$38,000
September 2	G1		$9,000	$29,000
September 8	G1	$3,280		$32,280
September 13	G1		$10,400	$21,880
September 19	G1		$1,900	$19,980
September 22	G1	$7,700		$27,680
September 28	G1		$5,300	$22,380
September 30	G1		$860	$21,520

Accounts Receivable Account No. 106
Date	PR	Debit	Credit	Balance
September 12	G1	$15,400		$15,400
September 22	G1		$7,700	$7,700
September 24	G1	$2,100		$9,800

Office Supplies Account No. 124
Date	PR	Debit	Credit	Balance
September 4	G1	$2,400		$2,400
September 29	G1	$550		$2,950

Prepaid Insurance Account No. 128
Date	PR	Debit	Credit	Balance
September 19	G1	$1,900		$1,900

Prepaid Rent Account No. 131
Date	PR	Debit	Credit	Balance
September 2	G1	$9,000		$9,000

Office Equipment Account No. 163
Date	PR	Debit	Credit	Balance
September 1	G1	$15,000		$15,000
September 4	G1	$8,000		$23,000

Accounts Payable Account No. 201
Date	PR	Debit	Credit	Balance
September 4	G1		$10,400	$10,400
September 13	G1	$10,400		$0
September 29	G1		$550	$550

Common Stock Account No. 307
Date	PR	Debit	Credit	Balance
September 1	G1		$53,000	$53,000

Dividends Account No. 319
Date	PR	Debit	Credit	Balance
September 28	G1	$5,300		$5,300

Service Revenue Account No. 401
Date	PR	Debit	Credit	Balance
September 8	G1		$3,280	$3,280
September 12	G1		$15,400	$18,680
September 24	G1		$2,100	$20,780

Utilities Expense Account No. 690
Date	PR	Debit	Credit	Balance
September 30	G1	$860		$860

Explanation of Solution

Cash Account No. 101
Date	PR	Debit	Credit	Balance
September 1	G1	$38,000		$38,000
September 2	G1		$9,000	$29,000
September 8	G1	$3,280		$32,280
September 13	G1		$10,400	$21,880
September 19	G1		$1,900	$19,980
September 22	G1	$7,700		$27,680
September 28	G1		$5,300	$22,380
September 30	G1		$860	$21,520

As we know that in case of cash account debit side increase the ending balance while credit side decrease the ending balance.

Accounts Receivable Account No. 106
Date	PR	Debit	Credit	Balance
September 12	G1	$15,400		$15,400
September 22	G1		$7,700	$7,700
September 24	G1	$2,100		$9,800

As we know that in case of accounts receivable account debit side increase the ending balance while credit side decrease the ending balance of this account.

Office Supplies Account No. 124
Date	PR	Debit	Credit	Balance
September 4	G1	$2,400		$2,400
September 29	G1	$550		$2,950

As we know that in case of office supplies account debit side increase the ending balance while credit side decrease the ending balance of this account.

Prepaid Insurance Account No. 128
Date	PR	Debit	Credit	Balance
September 19	G1	$1,900		$1,900

As we know that in case of prepaid insurance account debit side increase the ending balance while credit side decrease the ending balance of this account.

Prepaid Rent Account No. 131
Date	PR	Debit	Credit	Balance
September 2	G1	$9,000		$9,000

As we know that in case of prepaid rent account debit side increase the ending balance while credit side decrease the ending balance of this account.

Office Equipment Account No. 163
Date	PR	Debit	Credit	Balance
September 1	G1	$15,000		$15,000
September 4	G1	$8,000		$23,000

As we know that in case of office equipment account debit side increase the ending balance while credit side decrease the ending balance of this account.

Accounts Payable Account No. 201
Date	PR	Debit	Credit	Balance
September 4	G1		$10,400	$10,400
September 13	G1	$10,400		$0
September 29	G1		$550	$550

As we know that in case of accounts payable account credit side increase the ending balance while debit side decrease the ending balance of this account.

Common Stock Account No. 307
Date	PR	Debit	Credit	Balance
September 1	G1		$53,000	$53,000

As we know that in case of common stock account credit side increase the ending balance while debit side decrease the ending balance of this account.

Dividends Account No. 319
Date	PR	Debit	Credit	Balance
September 28	G1	$5,300		$5,300

As we know that in case of dividend account debit side increase the ending balance while credit side decrease the ending balance of this account because it is an expense.

Service Revenue Account No. 401
Date	PR	Debit	Credit	Balance
September 8	G1		$3,280	$3,280
September 12	G1		$15,400	$18,680
September 24	G1		$2,100	$20,780

As we know that in case of service account credit side increase the ending balance while debit side decrease the ending balance of this account.

Utilities Expense Account No. 690
Date	PR	Debit	Credit	Balance
September 30	G1	$860		$860

As we know that in case of utilities expense account debit side increase the ending balance while credit side decrease the ending balance of this account because it is an expense.

To determine

Concept introduction:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 3:

Trial balance as of the end of September.

Answer to Problem 1PSB

Trial Balance
As on September 30
	Debit	Credit
Cash	$21,520
Accounts receivable	$9,800
Office supplies	$2,950
Prepaid insurance	$1,900
Prepaid rent	$9,000
Office equipment	$23,000
Accounts payable		$550
Common stock		$53,000
Dividends	$5,300
Service revenue		$20,780
Utilities expense	$860
Totals	$74,330	$74,330

Explanation of Solution

1. All expenses and losses have debit balance, that is why these are shown in the debit column of the trial balance.

2. All revenues and gains have credit balance, that is why these are shown in the credit column of the trial balance.

3. All assets have debit balance, that is why these are shown in the debit column of the trial balance.

4. Liabilities and equity have credit balance, that is why these are shown in the credit column of the trial balance.

Trial Balance
As on September 30
	Debit	Credit
Cash	$21,520
Accounts receivable	$9,800
Office supplies	$2,950
Prepaid insurance	$1,900
Prepaid rent	$9,000
Office equipment	$23,000
Accounts payable		$550
Common stock		$53,000
Dividends	$5,300
Service revenue		$20,780
Utilities expense	$860
Totals	$74,330	$74,330