Question

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This exercise will continue the understanding of the accounting equation and double entry accounting that began in the prior chapter. In this chapter we will revisit the prior worksheet, but add a step. So here students must: 1. Identify what account(s) are affected by the transaction. 2. Identify if the affected accounts are increased or decreased by the transaction. 3. Determine if increasing (decreasing) the account is represented by a debit or credit 4. Journalize the transaction Example: The Insurance Company purchased a new computer system for $10,000 in cash. Account Effect on Account Debit Credit Computer System Assets increase decrease Debit Cash Assets increase decrease Credit Account DB CR Computer System 10,000 10,000 1. The Insurance Company purchased a new computer system for $10,000 on credit Account Effect on Account Debit/Credit Computer System increase decrease Accounts Payable increase decrease UUUUUUUUUU

Answer 1

1 Computer System Accounts payable Account Assets Liability Effect on account Debit/Credit Remarks increase decrease Debit It is an assets which has debit balance means if it increase will be debited increase decrease Credit It is a liability which has credit balance means if it increase will be credited DB CR Account Computer System Accounts payable 10000 10000 21 Computer System Land Account Assets Effect on account Debit/Credit Remarks increase decrease Debit It is an assets which has debit balance means if it increase will be debited increase decrease Credit It is an assets which has debit balance means if it decreses will be credited Assets CR Account Computer System Land DB 10000 10000 31 Account Wages Cash Expense Assets Effect on account Debit/Credit Remarks increase decrease Debit It is an expense account and all expense account has debit balance means if it increases will be debited increase decrease Credit It is an assets which has debit balance means if it decreses will be credited Account CR DB 5351 Wages Cash 5351 4 Cash Account Assets Revenue Effect on account Debit/Credit Remarks increase decrease Debit It is an assets which has debit balance means if it increases will be debited increase decrease Credit It is a revenue which has credit balance means if it increases will be credited Service Fees Account CR DB 1241 Cash Service Fees 1241 5 Account Accounts receivable Assets Service Fees Revenue Effect on account Debit/Credit Remarks increase decrease Debit It is an assets which has debit balance means if it increases will be debited increase decrease Credit It is a revenue which has credit balance means if it increases will be credited DB CR Account Accounts receivable Service Fees 10000 10000 6 Interest Expense Interest payable Account Expense Liability Effect on account Debit/Credit Remarks increase decrease Debit It is an expense account and all expense account has debit balance means if it increases will be debited increase decrease Credit It is a liability which has credit balance means if it increase will be credited CR Account Interest Expense Interest payable DB 4000) 4000

Amount Liability increased Decresed Balance sheet Amount Assets Credit increased Debit Decresed Debit Credit

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