Question

Q1- Provide an example of each title here and then record the journal entries (2 Marks).

Following is the first given answer.

1. Issuing common stocks for cash

Given answer:

ABC Company Received an investment of 1,000 from the owner .

Jouranl entry:

Cash           1000

           Common Stock      1000

2- Purchasing an equipment for cash.

3- Purchasing goods on credit.

4-Borrowing money from a bank.

5-Paying employees their salaries.

Q2- What types of accounts should be closed at the end of the period? What are the closing process? (1 Mark).

Q3- . Based on the following trial balance for XYZ company, prepare the income statement (2 Marks).

XYZ Partial Trial Balance December 31
Dividends	36,000
Revenue earned		72,000
Supplies expense	3,425
Rent expense	6,000
Wages expense	22,000

Answer 1

1.

No	Account Titles	Debit	Credit
Eg : XYZ company received 10,000 as capital from Mr X
1	Cash	10,000
	Common Stock		10,000
Eg: XYZ Company bought equipment worth $5000 for cash
2	Equipment	5,000
	Cash		5,000
Eg: ABC Co purchased inventory worth $3000 to be payable next month
3	Inventories	3,000
	Accounts Payable		3,000
Eg: Y Co borrowed $20,000 from the bank
4	Cash	20,000
	Loan from Bank		20,000
Eg: Y Co incurred salaries expense of $6000
5	Salaries expense	6,000
	Cash		6,000

2.

All temporary accounts are closed at the end of the accounting period. Temporary accounts include incomes, expenses, gain and loss accounts are transferred to the income summary account and then the closed directly to the capital account.

3.

Revenues
Revenue earned		72,000
Expenses
Supplies expense	3425
Rent expense	6000
Wages expense	22000
Total expenses		31425
Net Income		40,575
Less: Dividends		(36000)
Income transferred to Retained Earnings		4,575