1. Sample Journal Entry Exercises Week 1-Supplemental Information

2. Debits Credits Asset accounts…….Increase (+)Decrease (-) Liability accounts.…Decrease (-)Increase (+) Owner’s equity (capital) accounts…Decrease (-)Increase (+) Balance Sheet Accounts

3. Credit for increases (+) Debit for decreases (–) Owner’s Equity Accounts Credit for decreases (–) Debit for increases (+) Asset Accounts Credit for increases (+) Debit for decreases (–) Liability Accounts Balance Sheet Accounts

4. Debits Credits Revenue accounts…Decrease (-)Increase (+) Expense accounts…Increase (+)Decrease (-) Income Statement Accounts

5. Credit for increases (+) Debit for decreases (–) Revenue Accounts Income Statement Accounts Credit for decreases (–) Debit for increases (+) Expense Accounts Less

6. Equals Net Income (credit > debits) increases owners’ equity (capital) Net Loss (debits > credits) decreases owners’ equity (capital)

7. Increase (Normal Bal.) Decreases Balance sheet accounts: AssetDebitCredit LiabilityCreditDebit Owner’s Equity: Capital CreditDebit DrawingDebitCredit Income statement accounts: RevenueCreditDebit ExpenseDebitCredit

8. Prepare a journal entry for the purchase of a truck on June 3 for $42,500, paying $8,500 cash and the remainder on account. June 3 Truck42,500 Cash8,500 Accounts Payable34,000 Sample Exercise 1

9. Prepare a journal entry on August 7 for the fees earned on account, $115,000. Aug. 7Accounts Receivable115,000 Fees Earned115,000 Sample Exercise 2

10. The owner of a proprietorship may withdraw cash from the business for personal use. Such withdrawals have the effect of decreasing owner’s equity. Drawing Account

11. Prepare a journal entry on December 29 for the payment of $12,000 to the owner of Smartstaff Consulting Services, Dominique Walsh, for personal use. Dec. 29Dominique Walsh, Drawing12,000 Cash12,000 Sample Exercise 3

12. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate its normal balance. 1.Amber Saunders, Drawing 2.Accounts Payable 3.Cash 4.Fees Earned 5.Supplies 6.Utilities Expense Sample Exercise 4

13. 1.Debit entries only; normal debit balance 2.Debit and credit entries; normal credit balance 3.Debit and credit entries; normal debit balance 4.Credit entries only; normal credit balance 5.Debit and credit entries; normal debit balance 6.Debit entries only; normal debit balance Solution for Sample Exercise 4

14. On March 1, the cash account balance was $22,350. During March, cash receipts totaled $241,880 and the March 31 balance was $19,125. Determine the cash payments made during March. Sample Exercise 5

15. Using the following T-account solve for the amount of cash payment (indicated by ? below). Cash Mar. 1 Bal22,350?Cash payments Cash receipts241,880 Mar. 31 Bal.19,125 $19,125 = $22,350 + $241,880 – Cash payments Cash payments = $22,350 + $241,880 –$19,125 = $245,105 Solution for Sample Exercise 5

16. NetSolutions received an offer from a local retailer to rent the land purchased on November 5. The retailer plans to use the land as a parking lot for its employees and customers. NetSolutions agreed to rent the land to the retailer for three months, with the rent payable in advance.

17. Dec. 1NetSolutions receives $360 for three month’s rent for use of its land beginning December 1. 1 Cash11360 00 Unearned Rent23360 00 Received advance payment for three months’ rent on land.

18. Dec. 4NetSolutions purchased office equipment on account from Executive Supply Co. for $1,800. 4 Office Equipment181 800 00 Accounts Payable211 800 00 Purchased office equipment on account.

19. The equality of debits and credits for each transaction is built into the accounting equation: Assets = Liabilities + Owner’s Equity. Because of this double equality, this system is called the double- entry accounting system.

20. Reference Warren, C., Reeve, J., & Duchac, J., (2007). Accounting (22nd ed.). Mason, Ohio: Thomson South-Western Note: all the content information on these slides has been extracted from the above text.

21. Questions? Contact Your Instructor