Chapter D, Problem 2PSB

To determine

(1)

General journal refers to the entry for each transaction in the books of accounts using the debit and credit method. In the double entry system, each transaction is recorded twice, one account is debited, whereas, the other is credited.

To prepare the journal entries.

Explanation of Solution

Journal Entries:

Date	Particular	PR	Debit ($)	Credit ($)
A	Cash Office equipment computer equipment Common stock (To receive the investment by exchange the common stock)	101 163 164 307	65000 5750 30000	100750
B	Land Cash Note payable (To record the land purchase by cash and issue notes payable)	172 101 250	22000	5000 17000
C	Building Cash (To record the purchase building)	170 101	34500	34500
D	Prepaid insurance Cash (To record the prepaid insurance in advance)	108 101	5000	5000
E	Cash Account Receivable (To record the cash from the account receivable	101 106	4600	4600
F	Computer equipment Cash Notes payable (To record the purchase the drafting equipment)	164 101 250	4500	800 3700
G	Accounts receivable Fees earned (To record the accounts receivable)	106 402	4250	4250
H	Office equipment Account payable	163 201	950	950
I	Accounts receivable Fees earned (The company sale service in the credit basis)	106 402	10200	10200
J	Computer rent expense Accounts payable (To the rent expense)	602 201	580	580
K	Cash Accounts receivable (To record the money received from the old customer)	101 106	5100	5100
I	Wages Cash (To record the wages payment)	601 101	1800	1800
m.	Accounts payable Cash (To record the cash paid to accounts payable)	201 101	950	950
N	Computer Repair expense Cash (To record the repair expense)	604 101	608	608
O	Dividend Cash (To record the dividend payment)	319 101	6230	6230
P	Wages Cash (To record the wages payment)	601 101	1800	1800
Q	Advertising expense cash (To record the Advertising payment)	603 101	750	750

All transaction should be recorded as per the explanation.

In the Journal entry, each transaction is recorded twice, one account is debited, whereas, the other is credited.

To determine

(2)

Ledger is a book of financial statement. All types of journal entries are classified in these books. Ledger shows the accumulated transaction of a related item.

To prepare: The ledger accounts.

Explanation of Solution

The ledger account

Cash Accounts no. 101

Date	PR	Debit	Credit	Balance
A	307	65000		65000
B	172		5000	60000
C	170		34500	25500
D	108		5000	20500
E	106	4600		25100
F	164		800	24300
K	106	5100		29400
I	601		1800	27600
M	201		950	26650
N	604		608	26042
O	319		6230	19812
P	601		1800	18012
Q	603		750	17262

Office Equipment Accounts no. 163

Date	PR	Debit	Credit	Balance
A	307	5750		5750
H	201	950		6700

Computer Equipment  Accounts no. 164

Date	PR	Debit	Credit	Balance
A	307	5750		5750
F	101 250	800 3700		10250

Common stock Accounts no. 307

Date	PR	Debit	Credit	Balance
A	101		65000
A	163		5750
A	164		30,000	100750

Land Accounts no. 172

Date	PR	Debit	Credit	Balance
B	101	5000
B	250	17000		22000

Notes payable Accounts no. 250

Date	PR	Debit	Credit	Balance
B	172		17000	17000
F	164		3700	20700

Building Accounts no. 170

Date	PR	Debit	Credit	Balance
B	101	34500		34500

Prepaid insurance  Accounts no. 108

Date	PR	Debit	Credit	Balance
D	101	5000		5000

Account Receivable Accounts no. 106

Date	PR	Debit	Credit	Balance
E	101		4600	-4600
G	402	4250		-350
I	402	10200		9850
K	101		5100	4750

Accounts payable  Accounts no.201

Date	PR	Debit	Credit	Balance
H	163		950	950
J	602		580	1530
M	101	950		580

Fees earned Accounts no. 402

Date	PR	Debit	Credit	Balance
G	106		4250	4250
I	106		10200	14450

Computer rent expense  Accounts no. 602

Date	PR	Debit	Credit	Balance
J	201	580		580

Wages Accounts no. 601

Date	PR	Debit	Credit	Balance
I	101	1800		1800
P	101	1800		3600

Computer Repair Expense

Accounts no. 604

Date	PR	Debit	Credit	Balance
N	101	608		608

Dividend

 Accounts no. 319

Date	PR	Debit	Credit	Balance
O	101	6230		6230

Advertising expense Accounts no. 603

Date	PR	Debit	Credit	Balance
Q	101	750		750

In the ledger book, each transaction should be recorded separately.

A separate column should be prepared.

To determine

(3)

A trial balance is a list of ledger accounts.

Trial balance statements show the end balance of each ledger. They have two columns; one is debited and the other is credited.

To prepare: The Trial balance.

Explanation of Solution

Trial balance:

Particular	Number	Debit	Credit
Cash	101	17262
Office equipment	163	56700
Computer equipment	164	10250
Common stock	307		100750
Land	172	22000
Notes payable	250		20700
Building	170	34500
Prepaid insurance	108	5000
Account Receivable	106	4750
Account payable	201		580
Fees earned	402		14450
Computer rent expense	602	580
Wages	601	3600
Computer Repair expense	604	608
Dividend	319	6230
Advertising expense	603	750
Total		136480	136480

There are three types of trail balance:

1. Unadjusted trail balance
2. Adjusted trail balance
3. Closing trial balance.

The abovementioned trial balance is the unadjusted trial balance, because no transaction has been adjusted in it.

This is a simple trial balance which shows the list of accounts with amount.