Question

P2-30A Journalizing transactions, posting journal entries to T-accounts, and Learning preparing a trial balance Doris Stewart started her practice as a design consultant on September 1, 2015. During the first month of operations, the business completed the following transactions: 4 Total Sep. 1 Received $42,000 cash and gave capital to Stewart. 4 Purchased office supplies, $700, and furniture, $1,900, on account. 6 Performed services for a law firm and received $1,400 cash. 7 Paid $24,000 cash to acquire land to be used in operations. Performed services for a hotel and received its promise to pay the $1,000 within one week. 10 14 Paid for the furniture purchased on September 4 on the account. 15 Paid assistants semimonthly salary, $1,490. 17 Received cash on account, $400. 20 Prepared a design for a school on account, $700. 25 Received S1,800 cash for design services to be performed in October Received $2,100 cash for consulting with Plummer & Gordon. 28 29 Paid $1,200 cash for a 12-month insurance policy starting on October 1. 30 Paid assistant's semimonthly salary, $1,490. 30 Paid monthly rent expense, $650. 30 Received a bill for utilities, $350. The bill will be paid next month. 30 Stewart withdrew cash of $3,000. Requirements 1. Record each transaction in the journal using the following account titles: Cash Accounts Receivable; Office Supplies; Prepaid Insurance; Furniture; Land; Accounts Payable; Utilities Payable; Unearned Revenue; Stewart, Capital; Stewart, Withdrawals; Service Revenue; Salaries Expense; Rent Expense Utilities Expense. Explanations are not required. 2. Open a T-account for each of the accounts. 3. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal. 4. Prepare the trial balance of Doris Stewart, Designer, as of September 30, 2015.

Answer 1

Journal Entries

Journal entries are the record of the business transactions in the journal format on the date of their occurrence, where the total amount of debit must be equal to the total amount of credit.

1.

The following are the transactions of Company DS for the month of September, 2015:

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 1	Cash (A+)		42,000
	Common Stock (E+)			42,000
	(To record the issuance of common stock in exchange of cash)

• Cash is an asset and is increased by $42,000. Therefore, debit cash account with $42,000.

• Common stock is a component of equity and is increased by $42,000. Therefore, credit common stock account with $42,000.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 4	Office Supplies (A+)		700
	Furniture (A+)		1,900
	Accounts Payable (L+)			2,600
	(To record the purchase of office supplies and furniture on account)

• Office Supplies is an asset and is increased by $700. Therefore, debit office supplies account with $700.

• Furniture is an asset and is increased by $1,900. Therefore, debit furniture account with $1,900.

• Accounts payable is a liability and is increased by $2,600. Therefore, credit accounts payable account with $2,600.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 6	Cash (A+)		1,400
	Service Revenue (E+)			1,400
	(To record the service revenue rendered on account)

• Cash is an asset and is increased by $1,400. Therefore, debit cash account with $1,400.

• Service revenue is revenue and is increased by $1,400. Therefore, credit service revenue account with $1,400.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 7	Land (A+)		24,000
	Cash (A–)			24,000
	(To record the purchase of land in cash)

• Land is an asset and is increased by $24,000. Therefore, debit land account with $24,000.

• Cash is an asset and is decreased by $24,000. Therefore, credit cash account with $24,000.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 10	Accounts Receivable (A+)		1,000
	Service Revenue (E+)			1,000
	(To record the service revenue rendered on account)

• Accounts receivable is an asset and is increased by $1,000. Therefore, debit accounts receivable account with $1,000.

• Service revenue is revenue and is increased by $1,000. Therefore, credit service revenue account with $1,000.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 14	Accounts Payable (L–)		1,900
	Cash (A–)			1,900
	(To record the payment of account purchase of furniture on September 4)

• Accounts payable is a liability and is decreased by $1,900. Therefore, debit accounts payable account with $1,900.

• Cash is an asset and is decreased by $1,900. Therefore, credit cash account with $1,900.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 15	Salaries Expense (E–)		1,490
	Cash (A–)			1,490
	(To record the payment of salaries expense)

• Salaries expense is an expense and is increased by $1,490. Therefore, debit salaries expense account with $1,490.

• Cash is an asset and is decreased by $1,490. Therefore, credit cash account with $1,490.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 17	Cash (A+)		400
	Accounts Receivable (A–)			400
	(To record the received cash for service revenue rendered on account)

•

Cash is an asset and is increased by $400. Therefore, debit cash account with $400.

• Accounts receivable is an asset and is decreased by $400. Therefore, credit accounts receivable account with $400.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 20	Accounts Receivable (A+)		700
	Service Revenue (E+)			700
	(To record the service revenue rendered on account)

• Accounts receivable is an asset and is increased by $700. Therefore, debit accounts receivable account with $700.

• Service revenue is revenue and is increased by $700. Therefore, credit service revenue account with $700.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 25	Cash (A+)		1,800
	Unearned Revenue (L+)			1,800
	(To record the cash received for service revenue in advance)

• Cash is an asset and is increased by $1,800. Therefore, debit cash account with $1,800.

• Unearned Revenue is a liability and is increased by $1,800. Therefore, credit unearned revenue account with $1,800.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 28	Cash (A+)		2,100
	Service Revenue (E+)			2,100
	(To record the service revenue rendered on account)

• Cash is an asset and is increased by $2,100. Therefore, debit cash account with $2,100.

• Service revenue is revenue and is increased by $2,100. Therefore, credit service revenue account with $2,100.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 29	Prepaid Insurance (A+)		1,200
	Cash (A–)			1,200
	(To record the payment of insurance expense in advance)

• Prepaid insurance is an asset and is increased by $1,200. Therefore, debit prepaid insurance account with $1,200.

• Cash is an asset and is decreased by $1,200. Therefore, credit cash account with $1,200.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 30	Salaries Expense (E–)		1,490
	Cash (A–)			1,490
	(To record the payment of salaries expense)

• Salaries expense is an expense and is increased by $1,490. Therefore, debit salaries expense account with $1,490.

• Cash is an asset and is decreased by $1,490. Therefore, credit cash account with $1,490.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 30	Rent Expense (E–)		650
	Cash (A–)			650
	(To record the payment of rent expense)

• Rent expense is an expense and is increased by $650. Therefore, debit rent expense account with $650.

• Cash is an asset and is decreased by $650. Therefore, credit cash account with $650.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 30	Utilities Expense (E–)		350
	Utilities Payable (L+)			350
	(To record the accrued utility bill)

• Utilities Expense is an expense and is increased by $350. Therefore, debit utilities expense account with $350.

• Accounts payable is a liability and is increased by $350. Therefore, credit accounts payable account with $350.

• The following is the accounting equation for the entry:

Record the following journal entry in the general journal:

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
September 30	Dividends (E-)		3,000
	Cash (A-)			3,000
	(To record the payment of cash dividend to stockholders)

• Dividend is an expense and is increased by $3,000. Therefore, debit dividend account with $3,000.

• Cash is an asset and is decreased by $3,000. Therefore, credit cash account with $3,000.

2.

The following are the T accounts:

Cash Account

Cash Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Cash comes under the assets section of the accounting equation; therefore, debit increases cash account balance and a credit decreases cash account balance.

Accounts Receivable

Accounts Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Accounts receivable comes under the assets section of the accounting equation; therefore, a debit increases accounts receivable account balance and a credit decreases accounts receivable account balance.

Office Supplies

Office Supplies Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Office Supplies comes under the assets section of the accounting equation; therefore, a debit increases office supplies account balance and a credit decreases office supplies account balance.

Furniture

Furniture Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Furniture comes under the assets section of the accounting equation; therefore, a debit increases furniture account balance and a credit decreases furniture account balance.

Land

Land Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Land comes under the assets section of the accounting equation; therefore, a debit increases land account balance and a credit decreases land account balance.

Accounts Payable

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Accounts payable comes under the liabilities section of the accounting equation; therefore, a debit decreases accounts payable account balance and a credit increases accounts payable account balance.

Utilities Payable

Utilities Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Utilities payable comes under the liabilities section of the accounting equation; therefore, a debit decreases utilities payable account balance and a credit increases utilities payable account balance.

Unearned Revenue

Unearned Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Unearned revenue comes under the liabilities section of the accounting equation; therefore, a debit decreases unearned revenue account balance and a credit increases unearned revenue account balance.

Common Stock

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Common stock comes under the equity section of the accounting equation; therefore, a debit decreases common stock account balance and a credit increases common stock account balance.

Dividends

Dividends Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Dividends comes under the equity section of the accounting equation; therefore, a debit increases the account balance and a credit decreases the account balance.

Service Revenue

Service Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Service revenue is revenue and comes under the equity section of the accounting equation; therefore, a debit decreases the revenue account balance and a credit increases the revenue account balance.

Salaries Expense

Salaries Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Salaries expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases salaries expense account balance and a credit increases the equity and decreases salaries expense account balance.

Utilities Expense

Utilities Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Utilities expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases utilities expense account balance and a credit increases the equity and decreases utilities expense account balance.

Rent Expense

Rent Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Rent expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases rent expense account balance and a credit increases the equity and decreases rent expense account balance.

Prepaid Insurance

Prepaid Insurance Account
Date	Details	Debit ($)		Date	Details	Credit ($)

Explanation:

Prepaid Insurance comes under the assets section of the accounting equation; therefore, a debit increases prepaid insurance account balance and a credit decreases prepaid insurance account balance.

3.

Post the above journal entries to the T accounts.

Cash Account

Cash Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 1	Common Stock	42,000		September 7	Land	24,000
September 6	Service Revenue	1,400		September 14	Accounts Payable	1,900
September 17	Accounts Receivable	400		September 15	Salaries Expense	1,490
September 25	Unearned Revenue	1,800		September 29	Prepaid Insurance	1,200
September 28	Service Revenue	2,100		September 30	Salaries Expense	1,490
				September 30	Rent Expense	650
				September 30	Dividends	3,000
				September 30	Closing Balance	13,970
September 30	Total	47,700		September 30	Total	47,700

Explanation:

Cash comes under the assets section of the accounting equation; therefore, a debit increases cash account balance and a credit decreases cash account balance.

Accounts Receivable

Accounts Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 10	Service Revenue	1,000		September 17	Cash	400
September 20	Service Revenue	700		September 30	Closing Balance	1,300
September 30	Total	1,700		September 30	Total	1,700

Explanation:

Accounts receivable comes under the assets section of the accounting equation; therefore, a debit increases accounts receivable account balance and a credit decreases accounts receivable account balance.

Office Supplies

Office Supplies Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 4	Accounts Payable	700		September 30	Closing Balance	700
September 30	Total	700		September 30	Total	700

Explanation:

Office Supplies comes under the assets section of the accounting equation; therefore, a debit increases office supplies account balance and a credit decreases office supplies account balance.

Furniture

Furniture Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 4	Accounts Payable	1,900		September 30	Closing Balance	1,900
September 30	Total	1,900		September 30	Total	1,900

Explanation:

Furniture comes under the assets section of the accounting equation; therefore, a debit increases furniture account balance and a credit decreases furniture account balance.

Land

Land Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 7	Cash	24,000		September 30	Closing Balance	24,000
September 30	Total	24,000		September 30	Total	24,000

Explanation:

Land comes under the assets section of the accounting equation; therefore, a debit increases land account balance and a credit decreases land account balance.

Accounts Payable

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 14	Cash	1,900		September 4	Furniture	1,900
September 30	Closing Balance	700		September 4	Office Supplies	700
September 30	Total	2,600		September 30	Total	2,600

Explanation:

Accounts payable comes under the liabilities section of the accounting equation; therefore, a debit decreases accounts payable account balance and a credit increases accounts payable account balance.

Utilities Payable

Utilities Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Closing Balance	350		September 30	Utilities Expense	350
September 30	Total	350		September 30	Total	350

Explanation:

Utilities payable comes under the liabilities section of the accounting equation; therefore, a debit decreases utilities payable account balance and a credit increases utilities payable account balance.

Unearned Revenue

Unearned Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Closing Balance	1,800		September 25	Cash	1,800
September 30	Total	1,800		September 30	Total	1,800

Explanation:

Unearned revenue comes under the liabilities section of the accounting equation; therefore, a debit decreases unearned revenue account balance and a credit increases unearned revenue account balance.

Common Stock

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Closing Balance	42,000		September 1	Cash	42,000
September 30	Total	42,000		September 30	Total	42,000

Explanation:

Common stock comes under the equity section of the accounting equation; therefore, a debit decreases common stock account balance and a credit increases common stock account balance.

Dividends

Dividends Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Cash	3,000		September 30	Closing Balance	3,000
September 30	Total	3,000		September 30	Total	3,000

Explanation:

Dividends come under the equity section of the accounting equation; therefore, a debit increases the account balance and a credit decreases the account balance.

Service Revenue

Service Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Closing Balance	5,200		September 6	Cash	1,400
				September 10	Accounts Receivable	1,000
				September 20	Accounts Receivable	700
				September 28	Cash	2,100
September 30	Total	5,200		September 30	Total	5,200

Explanation:

Service revenue is revenue and comes under the equity section of the accounting equation; therefore, a debit decreases the revenue account balance and a credit increases the revenue account balance.

Salaries Expense

Salaries Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 15	Cash	1,490		September 30	Closing Balance	2,980
September 30	Cash	1,490
September 30	Total	2,980		September 30	Total	2,980

Explanation:

Salaries expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases salaries expense account balance and a credit increases the equity and decreases salaries expense account balance.

Utilities Expense

Utilities Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Utilities Payable	350		September 30	Closing Balance	350
September 30	Total	350		September 30	Total	350

Explanation:

Utilities expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases utilities expense account balance and a credit increases the equity and decreases utilities expense account balance.

Rent Expense

Rent Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 30	Cash	650		September 30	Closing Balance	650
September 30	Total	650		September 30	Total	650

Explanation:

Rent expense is an expense and comes under the equity section of the accounting equation. Therefore, a debit decreases the equity and increases rent expense account balance and a credit increases the equity and decreases rent expense account balance.

Prepaid Insurance

Prepaid Insurance Account
Date	Details	Debit ($)		Date	Details	Credit ($)
September 29	Cash	1,200		September 30	Closing Balance	1,200
September 30	Total	1,200		September 30	Total	1,200

Explanation:

Prepaid Insurance comes under the assets section of the accounting equation; therefore, a debit increases prepaid insurance account balance and a credit decreases prepaid insurance account balance.

4.

Trial balance is a statement in which all the year-end account balances of a business are shown in separate columns as debit and credit. Trial balance is prepared to check the arithmetical accuracy of the books of accounts of the business.

Prepare the correct trial balance for Company DS as of September 30, 2015.

Company DS
Trial Balance
September 30, 2015
Account Title	Balance
	Debit ($)	Credit ($)
Cash	13,970	–
Accounts Receivable	1,300	–
Office Supplies	700	–
Prepaid Insurance	1,200	–
Furniture	1,900	–
Land	24,000	–
Accounts Payable	–	700
Utilities Payable	–	350
Unearned Revenue	–	1,800
Common Stock	–	42,000
Dividends	3,000	–
Service Revenue	–	5,200
Salaries Expense	2,980	–
Rent Expense	650	–
Utilities Expense	350	–
Total	50,050	50,050