Accounting week 2
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accounting_week_2.rtf[INSERT TITLE HERE] 1
Running head: [INSERT TITLE HERE]
[INSERT TITLE HERE]
Student Name
Allied American University
Author Note
This paper was prepared for [INSERT COURSE NAME], [INSERT COURSE ASSIGNMENT] taught by [INSERT INSTRUCTOR’S NAME].
PART I: SHORT RESPONSE
Directions: Please respond to each of the following questions. Write at least 3 to 5 sentences for each question.
1. What is meant when we say that revenue and expenses fall under the umbrella of owner's equity? Why does revenue have the same placement of plus and minus signs as the Capital account, and why do expenses have the opposite placement of plus and minus signs as does the Capital account?
2. Explain how the Drawing account differs from an expense account.
3. List in order of preparation and explain the purpose of the three main financial statements, including what is on each statement.
4. Explain the trial balance, including when and why it is prepared.
5. List the main categories of accounts (as provided in a typical chart of accounts) and provide their specific normal balance.
6. Discuss the purposes of the general journal and the general ledger, as well as how they are connected.
7. What determines the method you would use to correct an error in the accounting records?
8. List and explain the two methods for correcting errors in accounting records.
PART II: APPLICATION
Directions: Please answer each of the following questions. Show your work as necessary.
1. Judy Kliskey owns the firm called Mother Nature's. She had the following transactions:
a.
Kliskey deposited $15,000 in the bank in the name of the business.
b.
Paid rent for the month, $820.
c.
Purchased office furniture on account from Osborn Office Supply, $2,640.
d.
Kliskey invested her personal computer and printer having a fair market value of $5,250.
e.
Bought office supplies on account from DeClerk Stationery, $1,620, and paid $480 as a down payment.
f.
Received $3,240 for services.
g.
Received and paid telephone bill, $180.
h.
Paid Osborn Office Supply $1,450 to apply on account.
i.
Billed clients for services, $2,210.
j.
Kliskey withdrew $1,540 for personal use.
k.
Received $1,420 from clients billed previously.
The transactions were recorded in T accounts as shown below.
Cash
Accounts Payable
Rent Expense
(a)
15,000
(b)
820
(c)
2,640
(e)
480
(b)
820
(k)
1,420
(e)
1,140
(h)
1,450
(g)
180
(h)
1,450
(j)
1,540
Accounts Receivable
J. Kliskey, Capital
Telephone Expense
(f)
3,240
(j)
1,540
(a)
15,000
(g)
180
(i)
2,210
(d)
5,250
Supplies
J. Kliskey, Drawing
Office Equipment
(e)
1,620
(d)
5,250
Income from Services
Office Furniture
(i)
2,210
(f)
1,420
(c)
2,640
Instructions:
Find seven errors made in recording the transactions, and state the account and amount that should have been debited and the account and amount that should have been credited.
2. The accounts and their balances as of December 31 of this year for Fast Delivery Service are presented below.
Accounts Receivable
$ 9,051
Accounts Payable
63,776
Advertising Expense
2,055
B. Dunn, Capital
68,162
B. Dunn, Drawing
10,700
Cash
20,087
Equipment
100,700
Income from Delivery Services
37,394
Insurance Expense
1,967
Rent Expense
10,900
Supplies
1,515
Utilities Expense
2,342
Wages Expense
10,015
Instructions:
1.
Prepare an income statement for the year ended December 31.
2.
Prepare a statement of owner's equity for the year ended December 31.
3.
Prepare a balance sheet as of December 31.
Fast Delivery Service
Income Statement
For Year Ended December 31, 20--
Revenue:
Income from Delivery Services
Expenses:
Rent Expense
Wages Expense
Advertising Expense
Utilities Expense
Insurance Expense
Total Expenses
Net Income
Fast Delivery Service
Statement of Owner's Equity
For Year Ended December 31, 20--
B. Dunn, Capital, January 1
Net Income for the Year
Less Withdrawals for the Year
Decrease in Capital
B. Dunn, Capital, December 31
Fast Delivery Service
Balance Sheet
December 31, 20--
Assets
Cash
Accounts Receivable
Supplies
Equipment
Total Assets
Liabilities
Accounts Payable
Owner's Equity
B. Dunn, Capital
Total Liabilities and Owner's Equity
3. During the first month of operation, Sasha’s Massage experienced the following transactions:
a.)
Owner deposited $20,000 in a bank account in the name of the business.
b.)
Bought equipment on account $1,250.
c.)
Paid cash for desk, $525, Ck. No. 100.
d.)
Received and paid bill for advertising, $740, Ck. No.101
e.)
Bought supplies on account, $300 Ck. No. 102.
f.)
Sold professional services on account, $300.
g.)
Received and paid the telephone and internet bill, $125, Ck. No. 103.
h.)
Paid $500 on account for purchased equipment, Ck. No. 104.
i.)
Sold professional services for cash. $250.
j.)
Tasha withdrew cash for personal use, $600, Ck. No. 105.
k.)
Paid wages to employee, $425, Ck. No. 106.
l.)
Tasha invested personal massage chair with a fair market value of $910 in the business
m.)
Sold professional services for cash. $150.
n.)
Sold professional services on account, $225.
o.)
Received cash on account from customer, $300.
Instructions:
1.
Record transactions in appropriate t-accounts and label with provided letter.
2.
Foot and balance accounts.
3.
Prepare trial balance dated December 31, 20--.
Cash
Accounts Payable
Massage Fees
Accounts Receivable
Sasha Towers, Capital
Advertising Expense
Supplies Expense
Sasha Towers, Drawing
Utilities Expense
Equipment
Wages Expense
Sasha’s Massage
Trial Balance
December 31, 20--
Cash
Accounts Receivable
Supplies
Equipment
Accounts Payable
Sasha Tower, Capital
Sasha Tower, Drawing
Massage Fees
Advertising Expense
Utilities Expense
Wages Expense
Totals
4. The chart of accounts for Mira Delivery Service is as follows:
Assets
Revenue
111
Cash
411
Income from Services
113
Accounts Receivable
115
Supplies
116
Prepaid Insurance
Expenses
121
Truck
511
Wages Expense
123
Computing Equipment
512
Truck Operating Expense
513
Repair Expense
Liabilities
514
Advertising Expense
211
Accounts Payable
519
Miscellaneous Expense
Owner's Equity
311
G. A. Mira, Capital
312
G. A. Mira, Drawing
Mira Delivery Service completed the following transactions during May:
May 3
Placed an advertisement in the Quarterly for $185; the amount is due in 30 days.
6
Bought supplies on account from Supplies, Inc., $318.
9
Billed Burien Bank for services performed, $450.
11
Received and paid gasoline and oil bill relating to the service truck, $125.
15
Mira invested in the business his own personal computing equipment with a fair market value of $525.
17
Received $618 from charge customers to apply on their accounts.
22
Received a bill from Wilson Trucking for repair services performed, $185.
26
Paid Supplies, Inc., $318 in full payment of account.
29
Paid wages to part-time employee, $410.
30
Received $390 for services performed.
31
G. A. Mira withdrew cash for personal use, $735.
Instructions:
Journalize the transactions for May, including a brief explanation for each entry.
GENERAL JOURNAL
PAGE
Date
Description
Post.
Ref.
Debit
Credit
20--
May
3
6
9
11
15
17
22
26
29
30
31
5. The chart of accounts for Lara Landscaping is as follows:
Assets
Revenue
111
Cash
411
Income from Services
112
Accounts Receivable
113
Supplies
114
Prepaid Insurance
Expenses
121
Equipment
511
Wages Expense
122
Truck
512
Truck Operating Expense
513
Rent Expense
Liabilities
514
Utilities Expense
211
Accounts Payable
Owner's Equity
311
J. Lara, Capital
312
J. Lara, Drawing
Lara Landscaping completed the following transactions in July:
July 2
Paid rent for the month of July, $580.
7
Received cash on account from Java Condos, $218 (previously billed).
9
Bought equipment on account from Bray Equipment, $610.
12
Received and paid telephone bill, $95.
15
Billed City Hall for services performed, $310.
20
Paid cash for liability insurance (six months), $350.
21
J. Lara invested in the business her personal equipment having a fair market value of $495.
23
Paid $200 on account to Bray Equipment.
31
Paid wages to part-time employee, $248.
31
Received cash for services performed, $723.
31
J. Lara withdrew cash for personal use, $515.
Instructions:
Journalize the transactions for July, including a brief explanation for each entry.
GENERAL JOURNAL
PAGE
Date
Description
Post.
Ref.
Debit
Credit
20--
July
2
7
9
12
15
20
21
23
31
31
31
6. The ledger of Alex Advertising and Publicity contained the following account balances as of October 31:
Accounts Payable
$2,450
Accounts Receivable
4,260
Advertising Revenue
9,640
C. D. Alex, Capital
7,650
C. D. Alex, Drawing
5,620
Cash
1,600
Equipment
5,240
Miscellaneous Expense
170
Prepaid Insurance
360
Public Relations Revenue
4,250
Rent Expense
900
Salary Expense
5,200
Supplies
400
Utilities Expense
240
Instructions:
Prepare a trial balance dated October 31 of the present year.
Alex Advertising and Publicity
Trial Balance
October 31, 20--
Account Name
Debit
Credit
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Equipment
Accounts Payable
C. D. Alex, Capital
C. D. Alex, Drawing
Advertising Revenue
Public Relations Revenue
Salary Expense
Rent Expense
Utilities Expense
Miscellaneous Expense
7. The chart of accounts for Samuel’s Trucking Company is as follows:
Assets
Revenue
101
Cash
401
Income from Services
105
Accounts Receivable
110
Supplies
115
Prepaid Insurance
Expenses
120
Truck
501
Wages Expense
125
Office Equipment
503
Truck Operating Expense
505
Rent Expense
Liabilities
507
Utilities Expense
201
Accounts Payable
509
Advertising Expense
Owner's Equity
301
T. Samuel, Capital
305
T. Samuel, Drawing
Samuel’s trucking Company completed the following transactions in October:
Oct. 1
T. Samuel invested in the business personal office equipment having a fair market value of $1,250.
5
Paid rent for the month of October, $1,575.
8
Bought supplies on account from Office Supplies Inc., $330.
10
Received $525 for services preformed.
15
Bill customer for services performed, $715.
20
T. Samuel withdrew cash for personal use, $500.
Instructions:
Journalize the transactions for October and post to appropriate ledger accounts.
GENERAL JOURNAL
PAGE
2
Date
Description
Post.
Ref.
Debit
Credit
20--
Oct.
1
5
8
10
15
20
Account
Cash
Acct. 101
Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Balance
5
10
20
Account Account Receivable Acct. 105 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account Supplies Acct. 110 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account PP Insurance Acct. 115 Balance
Date
Item
PR
DR
CR
DR
CR
Account Truck Acct. 120 Balance
Date
Item
PR
DR
CR
DR
CR
Account Office Equipment Acct. 125 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account A/P Acct. 201 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account T. Samuel, Capital Acct. 301 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
1
Account T. Samuel, Drawing Acct. 305 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account Income from Services Acct. 401 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
15
Account Wages Expense Acct. 501 Balance
Date
Item
PR
DR
CR
DR
CR
Account Truck Operating Expense Acct. 503 Balance
Date
Item
PR
DR
CR
DR
CR
Account Rent Expense Acct. 505 Balance
Date
Item
PR
DR
CR
DR
CR
20 Oct
Account Utilities Expense Acct. 507 Balance
Date
Item
PR
DR
CR
DR
CR
Account Advertising Expense Acct. 509 Balance
Date
Item
PR
DR
CR
DR
CR
