Question

Paid for advertising in the local paper Account #1 Account Type Increase/Decrease Debit/Credit advertising expenses expenses Increase Debit Account #2 Account Type Increase/Decrease Debit/Credit cash assets Decrease Credit Paid for a one year insurance policy Account #1 Account Type Increase/Decrease Debit/Credit Account #2 Account Type Increase/Decrease Debit/Credit Collected cash for services Account #1 Account Type Increase/Decrease Debit/Credit

please fill in the blanks

Answer 1

Paid for 1 year insurance policy

Account #1 Prepaid insurance Type Asset Inc/Dec Increase Dr/Cr Debit Account #2 Cash Type Asset Inc/Dec Decrease Dr/Cr Credit

As insurance is paid in advance it will not be treated as an expense until expired each month. therefore, advance insurance payment will be treated as an asset and cash balance will be reduced by crediting it.

Collected Cash for services

Account #1 Cash Type Asset Inc/Dec Increase Dr/Cr Debit Type Account #2 Services Revenue Inc/Dec Increase Dr/Cr Credit Revenue

Service given will be recognized as income and since income has a credit balance service revenue account will be credited. Cash collected will be debited as it will increase cash balance.

Bought a company truck by signing a note at the bank

Account #1 Truck Type Asset Inc/Dec Increase Dr/Cr Debit Account #2 Notes Payable Type Liability Inc/Dec Increase Dr/Cr Credit

Truck purchased will be debited to an asset account . As the truck is purchased on credit by taking notes payable from bank a liability will be credited (increased ) in books as notes payable.

Collected Cash for future services

Account #1 Cash Type Asset Inc/Dec Increase Dr/Cr Debit Account #2 Unearned Service Revenue Type Liability Inc/Dec Increase Dr/Cr Credit

As per reveneue recognition principle, income will be recognized only when the services are completely rendered and not when cash is received. therefore, cash recieved in advance for services to be given in future will be treated as liability and recorded as "unearned revenue".

Purchased $6,000 of equipment on account

Date Accounts and expl Debit Credit 3-Nov Equipment 6,000 Accounts Payable 6,000 (Equipment purchased on credit)

Received $5,000 for services rendered to a client

Date Accounts and expl Debit Credit 4-Nov Cash 5,000 Service Revenue 5,000 (Cash received for services rendered)

Paid $5,000 cash for land

Date Accounts and expl Debit Credit 5-Nov Land 5,000 Cash 5,000 (land asset purchased by paying cash)

Received $8,000 from selling shares of stock

Credit Date Accounts and expl Debit 5-Nov Cash 8,000 Paid-in Capital- Common Stock (shares issued for cash) 8,000

Bought a company truck for $7,000 by signing a note at the bank

Date Accounts and expl Debit Credit 5-Nov Truck 7,000 Notes Payable 7,000 (truck purchased on credit by signing notes payable)