(a)
T-Accounts:
T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
- The title of accounts.
- The debit side (Dr) and,
- The credit side (Cr).
To Enter: The beginning balances of November in the ledger accounts.
(a)
Explanation of Solution
Enter the beginning balances of November in the ledger accounts as follows:
Cash | |||
Nov. 1 | $ 2,790 | ||
Bal. | $ 2,790 |
Table (1)
Supplies | |||
Nov. 1 | $ 1,120 | ||
Bal. | $ 1,120 |
Table (2)
Equipment | |||
Nov. 1 | $ 10,000 | ||
Bal. | $ 10,000 |
Table (3)
Accounts Payable | |||
Nov. 1 | $ 2,300 | ||
Bal. | $ 2,300 |
Table (4)
Accounts Receivable | |||
Nov. 1 | $ 2,910 | ||
Bal. | $ 2,910 |
Table (5)
Unearned Service Revenue | |||
Nov. 1 | $ 400 | ||
Bal. | $ 400 |
Table (6)
Common Stock | |||
Nov. 1 | $10,000 | ||
Bal. | $10,000 |
Table (7)
Retained Earnings | |||
Nov. 1 | $ 3,000 | ||
Bal. | $ 3,000 |
Table (8)
| |||
Nov. 1 | $ 500 | ||
Bal. | $ 500 |
Table (9)
Salaries and Wages Payable | |||
Nov. 1 | $ 620 | ||
Bal. | $ 620 |
Table (10)
(b)
Journal:
Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
To Journalize: The transaction of Company S for the month of November.
(b)
Explanation of Solution
Journalize the transaction of Company S for the month of November.
Date | Account Title and Description | Debit ($) | Credit ($) |
November 8 | Salaries and Wages Payable | 620 | |
Salaries and Wages Expense | 600 | ||
Cash | 1,220 | ||
(To record the payment made for salaries and wages of employees) | |||
November 10 | Cash | 1,800 | |
Accounts Receivable | 1,800 | ||
(To record the cash received in payment of account) | |||
November 12 | Cash | 3,700 | |
Service Revenue | 3,700 | ||
(To record the cash received for the service performed) | |||
November 15 | Equipment | 3,600 | |
Accounts Payable | 3,600 | ||
(To record the purchase of equipment on account) | |||
November 17 | Supplies | 1,300 | |
Accounts Payable | 1,300 | ||
(To record the purchase of supplies on account) | |||
November 20 | Accounts Payable | 2,500 | |
Cash | 2,500 | ||
(To record the payment of cash to creditors) | |||
November 22 | Rent Expenses | 480 | |
Cash | 480 | ||
(To record the payment of rent for the month of November) | |||
November 25 | Salaries Expenses | 1,000 | |
Cash | 1,000 | ||
(To record the salaries paid to the employees) | |||
November 27 | Accounts receivable | 900 | |
Service Revenue | 900 | ||
(To record the services performed on account) | |||
November 29 | Cash | 750 | |
Unearned Service revenue | 750 | ||
(To record the cash received for the service yet to provide) |
Table (11)
(c)
To
(c)
Explanation of Solution
Cash | |||
Nov. 1 | $ 2,790 | Nov. 8 | $ 1,220 |
10 | $ 1,800 | 20 | $ 2,500 |
12 | $ 3,700 | 22 | $ 480 |
29 | $ 750 | 25 | $ 1,000 |
Total | $ 9,040 | Total | $ 5,200 |
Bal. | $ 3,840 |
Table (12)
Accounts receivable | |||
Nov. 1 | $ 2,910 | Nov. 10 | $ 1,800 |
27 | $ 900 | ||
$ 3,810 | $ 1,800 | ||
Bal. | $ 2,010 |
Table (13)
Supplies | |||
Nov. 1 | $ 1,120 | ||
17 | $ 1,300 | ||
Bal. | $ 2,420 |
Table (14)
Equipment | |||
Nov. 1 | $ 10,000 | ||
15 | $ 3,600 | ||
Bal. | $ 13,600 |
Table (15)
Accumulated | |||
Nov. 1 | $ 500 | ||
Bal. | $ 500 |
Table (16)
Accounts Payable | |||
Nov. 20 | $ 2,500 | Nov. 1 | $ 2,300 |
15 | $ 3,600 | ||
17 | $ 1,300 | ||
Total | $2,500 | Total | $ 7,200 |
Bal. | $ 4,700 |
Table (17)
Unearned Service Revenue | |||
Nov. 1 | $ 400 | ||
29 | $ 750 | ||
Bal. | $ 1,150 |
Table (18)
Salaries and Wages Payable | |||
Nov. 8 | $ 620 | Nov. 1 | $ 620 |
Bal. | $ 0 |
Table (19)
Common Stock | |||
Nov. 1 | $10,000 | ||
Bal. | $10,000 |
Table (20)
Retained Earnings | |||
Nov. 1 | $ 3,000 | ||
Bal. | $ 3,000 |
Table (21)
Service Revenue | |||
Nov. 22 | $ 3,700 | ||
27 | $ 900 | ||
Bal. | $ 4,600 |
Table (22)
Salaries and Wages Expenses | |||
Nov. 8 | $ 600 | ||
25 | $ 1,000 | ||
Bal. | $ 1,600 |
Table (23)
Rent Expense | |||
Nov. 22 | $ 480 | ||
Bal. | $ 480 |
Table (24)
(d)
A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit column with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances, and before the preparation of financial statements.
To prepare: The trial balance of Company S at November, 30.
(d)
Explanation of Solution
Prepare a trial balance of Company S for the month ended November, 30 as follows:
Company S Trial Balance November 30, 2017 | ||
Particulars | Debit $ | Credit $ |
Cash | 3,840 | |
Accounts receivable | 2,010 | |
Supplies | 2,420 | |
Equipment | 13,600 | |
Accumulated depreciation- Equipment | 500 | |
Accounts payable | 4,700 | |
Salaries and wages payable | 0 | |
Unearned service revenue | 1,150 | |
Common stock | 10,000 | |
Service revenue | 4,600 | |
Retained earnings | 3,000 | |
Salaries and wages expense | 1,600 | |
Rent expenses | 480 | |
Total | 23,950 | 23,950 |
Table (25)
(e)
An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business
To Journalize: Theadjusting entries of Company S for November 30, posting the adjusting entries to the ledger accounts.
(e)
Explanation of Solution
The adjusting entries of Company S for November 30, 2017 are as follows:
(1)
Date | Accounts title and Description |
Debit ($) |
Credit ($) |
November 30 | Supplies expense (1) | 1,320 | |
Supplies | 1,320 | ||
(To record the supplies expenses) |
Working notes:
Description:
- Supplies expense is an expense account. There is an increase in the expenses, and hence it is debited. (Increase in Supplies expense decreases
stockholders’ equity account). Supply is an asset account. There is a decrease in asset, and hence, it is credited.
(2)
Date | Account Titles and Description | Debit ($) | Credit ($) |
November 30 | Salaries and wages expense | 480 | |
Salaries and wages payable | 480 | ||
(To record the accrued salaries payable) |
Description:
- Salaries and wages expense is an expense account. There is an increase in the salaries and wages expenses, and hence it is debited. (Increase in salaries and wages expense decreases stockholders’ equity account). Salaries and wages payable is a liability account. There is an increase in liability, and hence, it is credited.
(3)
Date | Account Titles and Description | Debit ($) | Credit ($) |
November 30 | Depreciation expense | 250 | |
Accumulated depreciation –Equipment | 250 | ||
(To record the depreciation and the accumulated depreciation) |
Description:
- Depreciation expense is an expense account. There is an increase in the expenses, and hence it is debited. Accumulated Depreciation is a contra-asset account. There is a decrease in assets, and hence, it is credited.
(4)
Date | Account Titles and Description | Debit ($) | Credit ($) |
November 30 | Unearned service revenue | 500 | |
Service revenue | 500 | ||
(To record the service performed for the cash earned) |
Description:
- Unearned service revenue is a liability account. There is a decrease in the liability, and hence it is debited. Service revenue is a component of stockholder’s equity account. There is an increase in service revenue, and hence, it is credited.
- Post the adjusting entries to the respective ledger accounts as follows:
Supplies | |||
Nov. 30 | $ 2,420 | 30 | $ 1,320 |
Bal. | $ 1,100 |
Table (26)
Supplies Expense | |||
Nov. 30 | $ 1,320 | ||
Bal. | $ 1,320 |
Table (27)
Salaries and Wages Expenses | |||
Nov. 30 | $ 1,600 | ||
30 | $ 480 | ||
Bal. | $ 2,080 |
Table (28)
Salaries and Wages Payable | |||
Nov. 30 | $ 0 | ||
30 | $ 480 | ||
Bal. | $ 480 |
Table (29)
Accumulated Depreciation – Equipment | |||
Nov. 30 | $ 500 | ||
30 | $ 250 | ||
Bal. | $ 750 |
Table (30)
Depreciation Expense | |||
Nov. 30 | $ 250 | ||
Bal. | $ 250 |
Table (31)
Service Revenue | |||
Nov. 30 | $ 4,600 | ||
30 | $ 500 | ||
Bal. | $ 5,100 |
Table (32)
Unearned Service Revenue | |||
$ 500 | Nov. 30 | $ 1,150 | |
Bal. | $ 650 |
Table (33)
(f)
Adjusted trial balance:
The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
To prepare: An adjusted trial balance of Company S at November 30.
(f)
Explanation of Solution
Prepare an adjusted trial balance of Company S for the month ended November 30 as follows:
Company S Adjusted Trial Balance November 30, 2017 | ||
Particulars | Debit $ | Credit $ |
Cash | 3,840 | |
Accounts receivable | 2,010 | |
Supplies | 1,100 | |
Equipment | 13,600 | |
Accumulated depreciation- Equipment | 750 | |
Accounts payable | 4,700 | |
Salaries and wages payable | 480 | |
Unearned service revenue | 650 | |
Common stock | 10,000 | |
Service revenue | 5,100 | |
Retained earnings | 3,000 | |
Depreciation expenses | 250 | |
Salaries and wages expense | 2,080 | |
Supplies expenses | 1,320 | |
Rent expenses | 480 | |
Total | 24,680 | 24,680 |
Table (34)
(g)
Income statement:
An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.
Statement of retained earnings:
This is an equity statement which shows the changes in the stockholders’ equity over a period of time.
Classified balance sheet:
This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
To Prepare: The income statement for the month of November, the retained earnings statement for the month of November, a classified balance sheet of Company S for the month ended November 30, 2017.
(g)
Explanation of Solution
The income statement of Company S for the month of November, 30 2017 is computed in the table below:
S Company | ||
Income Statement | ||
As on November 30, 2017 | ||
Particulars | $ | $ |
Revenue: | ||
Service Revenue | 5,100 | |
Less: Expenses | ||
Salaries Expenses | 2,080 | |
Supplies Expenses | 1,320 | |
Rent Expenses | 480 | |
Depreciation Expenses | 250 | |
Total Expenses | 4,130 | |
Net income | 970 |
Table (35)
The retained earnings statement of Company S for the month of November, 2017 is computed in the table below:
S Company | ||
Retained earnings statement | ||
For the month ended November 30, 2017 | ||
Particulars | $ | |
Retained earnings at November, 1 | 3,000 | |
Add: Net income | 970 | |
Retained earnings at November, 30 | 3,970 |
Table (36)
The classified balance sheet of Company S as on November 30, 2017 is prepared in the table below:
S Company | ||
Classified Balance sheet Statement | ||
As at November 30, 2017 | ||
Assets | $ | $ |
Current assets: | ||
Cash | 3,840 | |
Accounts receivable | 2,010 | |
Supplies | 1,100 | |
Total of current assets | 6,950 | |
Other assets: | ||
Equipment | 13,600 | |
Less: Accumulated depreciation -Equipment | 750 | |
Total of other assets | 12,850 | |
Total assets | $19,800 | |
Liabilities and Stockholders' equity | $ | $ |
Liabilities: | ||
Accounts payable | 4,700 | |
Unearned service revenue | 650 | |
Salaries and wages payable | 480 | |
Total liabilities | 5,830 | |
Stockholders' equity: | ||
Common stock | 10,000 | |
Retained earnings | 3,970 | |
Total stockholders' equity | 13,970 | |
Total liabilities and stockholders' equity | 19,800 |
Table (37)
The retained earnings for the month of November, 2017 are $3,970.
The classified balance sheet for the month ended November, 30 2017 are agreed, both the assets account and the liabilities account shows a balance of $19,800
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