Exam 2: Recording Business Transactions

Given the following list of errors, determine the effect on assets, liabilities, and shareholders' equity by completing the chart below. Use (+) to indicate overstated, (-) to indicate understated, and (0) to indicate no effect. Transaction (a) is completed as an example. a. The entry to record the purchase of $800 of equipment on account was never posted. b. The entry to record the purchase of $100 of supplies for cash was posted as a debit to Supplies and a credit to Accounts Payable. c. A $1,000 debit to Cash was posted as $100. d. A $400 debit to the Accounts Payable account was never posted. e. A debit to Accounts Receivable of $500 was posted as a credit to Accounts Receivable. b. c. d. e.

Use T-accounts to analyze the following transactions for the Red Panda Corporation: a. Owner invested $550,000 cash and equipment with a value of $5,500 into the business received common shares in return. b. Purchased office supplies on account, $300. c. Performed services for a customer on account, $3,500. d. Purchased a building by paying $100,000 down and signing a note for the remainder of $800,000. e. Performed services for a customer and immediately collected $4,500 cash. f. Paid employees salaries of $2,200. Determine the ending cash balance. Note this is their first month of operations.

Receiving a payment from a customer on account would:

All shareholders equity accounts typically have a credit balance except for dividends which are a debit.

The ledger provides a good indication of how much cash is available for the business to use.

On a trial balance the total of all debits must equal the total of all credits.

Which of the following items of information would not normally be included in a journal entry?

This summarizes all the account balances for the financial statements and shows whether total debits equals total credits:

If a trial balance is in balance, the accountant is assured that no mistakes were made either in recording or posting.

On a trial balance the total of all debits must equal the total of all credits.

All of the following accounts would be considered assets except for:

All revenue accounts normally have a credit balance.

The right side of a T-account is always the debit side.

Accounts payable normally has a debit balance.

The normal balance of a revenue account is a ________ because revenues increase ________.

Receiving cash from a customer on account would include a:

Define the term account and describe the relationship between accounts and the ledger.

An expense account is known as a contra equity account.

Performing a service on account would include a:

A balance sheet is a required financial statement that reports the financial position of the company as of a given day in time.