Exam 3: The Recording Process: Debits and Credits

Ivan Collins was appointed the manager of Steelers Properties, a recently formed company that manages residential rental properties. Linda Cohen is the accountant. She prepared a chart of accounts based on an analysis of the expenditures of the company. One of the largest expense categories is Travel and Entertainment. Mr. Collins believes that it is important to maintain a presence in the social life of the city. In this, he sharply differs from his father, John Collins. The elder Mr. Collins has set up Steelers Properties in order to test his son's management skills before allowing him to manage the more lucrative commercial property business. John Collins provided the capital for Steelers, and maintains close contact with the company. He allowed his son, however, to hire his own employees. Ivan has asked Ms. Cohen to change the name of the Travel and Entertainment account 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. Cohen 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. Cohen agree to the change in the Travel and Entertainment account to Property Development? Explain.

The left side of an account is

Revenues are part of owner's capital.

Sun Rise Grill paid $3,000 for July rent on the building it occupies. To record this transaction, Sun Rise will

Credits are used to

Madrid Industries purchased supplies for $1,200. They paid $500 in cash and agreed to pay the balance in 30 days. Recording this transaction would include a debit to an asset account for $1,200, and a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?

Services performed on account requires a debit to Cash.

In the first month of operations, the total of the debit entries to Delaney Company's cash account amounted to $2,100 and the total of the credit entries to the company's cash account amounted to $1,400. The balance of the cash account at the end of the month is a

An account will have a credit balance if the

The purchase of supplies decreases Owner's Capital.

A credit to a liability account

Recording the purchase equipment for cash requires a debit to the Cash account.

When an owner makes a withdrawal,

A credit is not the normal balance for which account listed below?

A payment on account requires a credit to Cash.

Pope Accounting Service purchased new computers for a total of $12,000. Pope paid $2,000 in cash and signed a note for the balance. Pope debited the Equipment account, credited the Cash account and

The purchase equipment for cash increases total expenses.

An _______________ is a record of increases and decreases in specific assets, liabilities, and owner's equity items.

When cash is invested in the business by the owner, the Cash account is increased with a debit.

OPI Company purchased supplies on account. To record the purchase, OPI will