Question

Presented below is information related to Lexington Real Estate Agency oct. 1 Diane Lexington begins business as a real estate agent with a cash in 27 Pays $1,211 on the balance related to the transaction of October 3. 30 Pays the administrative assistant $3,561 in salary for October t is entered. Do not indent manualy. Record journal entries in the order presented in the problem. If no en

Answer 1

Solution:-

Journal is a primary books of records. Here transaction is recorded as soon as it occurs. The problem is related with a person who is a real estate agent. His operating activity is to deal with real estate buy and sell. Consider each transactions one by one.

1. On 1st October he has invested capital in his business of $28,490. Business is getting cash from him. It is an asset of the business. As it is an addition, the amount is debited in cash account. Against this cash common stocks are issued. It is a liability to proprietor which will be paid on closure of the concern. So it is credited. Thus Journal is-

Dated	Details and account heads	Debit	Credit
Oct 1	Cash	$28,490
	Common stock		$28,490
	[Issued common stock to properties]

2. Second transaction is hiring of an administrative assistant. It is a non financial event at this moment. Money will be paid when he works and salary will be due. So no entry is required.

3. On October 3 office furniture purchased on account. It is a durable asset. It is related with real estate business. It is like a trading item bought. So instead of Office furniture, cost of real estate service account will be debited. Corresponding credit will be in accounts payable as the amount is due.

Dated	Details and account heads	Debit	Credit
Oct 3	Cost of real estate service	$3,276
	Accounts payable		$3,276
	Purchased on account office furniture]

4. Now reality service provided by selling a house. So reality service revenue as income will be credited. Bill has been raised. Amount is due. It is an asset. So accounts receivable is debited.

Dated	Details and account heads	Debit	Credit
Oct 1	Accounts receivable	$5,128
	Reality service revenue		$5,128
	[Sold reality estate and bill raised]

5. Transaction of 27th paid in part. As cash is going out the amount is credited in cash. It will reduce payable amount. So accounts payable is debited.

Dated	Details and account heads	Debit	Credit
Oct 27	Accounts payable	$1,211
	Cash		$1,211
	paid dues of Oct 3 in part]

6.Payment of salary is a cost of service provided. So cost of service is debited with corresponding credit in cash

Dated	Details and account heads	Debit	Credit
Oct 30	Cost of real estate service	$3,561
	Cash		$3,561
	[Salary paid to administrative staff]