Exam 2: The Recording Process

During February 2018 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?

A simple journal entry requires only one debit to an account and one credit to an account.

The chart of accounts is a special ledger used in accounting systems.

Customarily, a trial balance is prepared

During an accounting period, a business has numerous transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.

After a transaction has been posted, the reference column in the journal should not be blank.

Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others. 1. A payment of $500 to a creditor was recorded by a debit to Accounts Payable of $50 and a credit to Cash of $500. 2. A $480 payment for a printer was recorded by a debit to Equipment of $48 and a credit to Cash for $48. 3. An account receivable in the amount of $2,500 was collected in full. The collection was recorded by a debit to Cash for $2,500 and a debit to Accounts Payable for $2,500. 4. An account payable was paid by issuing a check for $800. The payment was recorded by debiting Accounts Payable $800 and crediting Accounts Receivable $800.

Transactions are recorded in alphabetic order in a journal.

Transactions are entered in the ledger accounts and then transferred to journals.

Posting

Devendra Company pays cash dividends of $600. The entry for this transaction will include a debit of $600 to

Transactions for Tom Petty Company for the month of October are presented below. Journalize each transaction and identify each transaction by number. You may omit journal explanations. 1. Invested $40,000 cash in the business in exchange for stock. 2. Purchased land costing $28,000 for cash. 3. Purchased equipment costing $15,000 for $3,000 cash and the remainder on credit. 4. Purchased supplies on account for $800. 5. Paid $1,000 for a one-year insurance policy. 6. Received $3,000 cash for services performed. 7. Received $4,000 for services previously performed on account. 8. Paid wages to employees for $2,500. 9. Paid dividends of $2,000.

Credits

The ledger accounts of the Fabulous Muscles Gym at June 30, 2018 are shown below: Instructions Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading.

The best interpretation of the word credit is the

An account consists of

Assets normally show

The following transactions took place for Xiu Xiu Company during June 2018: (a) Purchased equipment on account for $9,000. (b) Billed customers $5,000 for services performed. (c) Made payment of $2,300 on account for equipment purchased earlier in month. (d) Collected $2,900 on customer accounts. 1. What is the balance in Accounts Payable at June 30, 2018? 2. What is the balance in Accounts Receivable at June 30, 2018?

A three column form of account is so named because it has columns for

Jim Coleman, Jr. was appointed the manager of Maris Properties, a recently formed company that manages residential rental properties. Linda Grider is the accountant. She prepared a chart of accounts based on an analysis of the expenditures of the company. Two of the largest expense categories are Travel and Entertainment. Mr. Coleman believes that it is important to maintain a presence in the social life of the city. In this, he sharply differs from his father, Jim Coleman, Sr. The elder Mr. Coleman has set up Maris Properties in order to test his son's management skills before allowing him to manage the more lucrative commercial property business. Mr. Coleman, Sr. provided the capital for Maris, and maintains close contact with the company. He allowed his son, however, to hire his own employees. Mr. Coleman has asked Ms. Grider to change the names of the Travel and Entertainment Expense accounts to Property Development. He hopes to deflect his father's attention away from the amount he has spent on travel and entertainment until he has proven that his methods work. When Ms. Grider resisted, he reminded her that he, not his father, hired her. He also reminded her that she had been enthusiastic about his business plans when she was hired. Required: 1. Who are the stakeholders in this situation? 2. Should Ms. Grider agree to the change in the Travel Expense and Entertainment Expense accounts to Property Development? Explain.