Question

Transactions and T Accounts

The following selected transactions were completed during August of the current year:

1. Billed customers for fees earned, $46,370.
2. Purchased supplies on account, $1,990.
3. Received cash from customers on account, $43,590.
4. Paid creditors on account, $1,210.

a. Journalize these transactions in a two-column journal, using the appropriate number to identify the transactions. If an amount box does not require an entry, leave it blank.

(1)
(2)
(3)
(4)

b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, select the appropriate number to identify the transactions.

Cash

Supplies

Accounts Receivable

Accounts Payable

Fees Earned

c. Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred?

Answer 1

Answer to Question a:

Credit Date Account Debit (1) Accounts Receivable $ 46,370 Fees Earned (To record service revenue earned) $ 46,370 (2) Supplies $ 1,990 Accounts Payable $ 1,990 (To record for purchase of supplies on account) - (3) Cash $ 43,590 Accounts Receivable $ 43,590 (To record cash received from customers on account) $ 1,210 Accounts Payable Cash (To record cash paid to creditor) $ 1,210

Answer to Question b:

Accounts Receivable (3) Cash Accounts $ 43,590 (4) Payable Closing 31-Dec Balance $ 1,210 $ 42,380 Supplies Accounts Payable (2) $ 1,990 Closing 31-Dec Balance $ 1,990 (1) Fees Earned $ 43,590 Accounts Receivable $ 46,370 (3) Cash Closing 31-Dec Balance $ 2,780 Accounts Payable $ 1,210 (2) (4) Supplies $ 1,990 Cash Closing 31-Dec Balance $ 780 Fees Earned Accounts Receivable (1) $ 46,370 Closing 31-Dec Balance $ 46,370

Answer to Question c:

Question c It is important to check whether the beginning balance is debit or credit balance. If the beginning balance was a credit balance was which enormously higher than the closing debit balance for August, then it would result in a lower balance but it would be a credit balance only. It does not imply that an error has occurred. But if there is no opening/beginning balance for August and the accounts receivable still shows a credit balance only, then a error has occurred. But normally accounts receivable has a debit balance only.