Option #1: The Four Steps in the Accounting Process You own an independent CPA f

Question

Option #1: The Four Steps in the Accounting Process

You own an independent CPA firm. One client had the following transactions in January 20x7.

Issued share capital for $5,000 cash

Purchased $3,000 of equipment on credit

Paid $600 cash for this month’s rent

Purchased on credit $3,000 of supplies to be used next month

Billed $3,500 to customers for repairs made to date

Paid cash for one-half of the amount owing in Transaction 4

Collected $400 cash of the amount billed in Transaction 5

Sold one-half of the equipment purchased in Transaction 2 for $1,200 in cash.

Required:

Use the four steps in the accounting process to analyze business transactions, a) Identifying transactions and source documents, b) Analyzing transactions using the accounting equation, c) Recording the journal entry and d) Posting the entry to the ledger to complete the following:

Prepare journal entries for each of the above transactions.

Post the journal entries to T–accounts and total the accounts.

From the T–accounts, prepare an unadjusted trial balance. List expenses in alphabetical order.

Use the following chart of accounts names and the template:

Cash, Capital Stock, Equipment, Accounts Payable, Rent Expense, Supplies, Accounts Receivable, Revenue.

ACT300 Principles of Accounting I Module 2: Critical Thinking Template Option #1 Journal Entries Date Account Name T-Accounts January Debit Credit 1 Shared Capital Issued Cash Capital Stock Cash 2 3 Balance Balance 4 Accounts Receivable Accounts Payable 5 Balance Balance 6 Equipment 7 Balance Supplies 8 Balance Revenue Balance Rent Expense Balance Unadjusted Trial Balance Account Name Debit Credit Cash            -   Accounts receivable            -   Equipment            -   Supplies            -   Accounts payable           -   Capital stock           -   Revenue           -   Rent expense            -      Total            -             -  

Explanation / Answer

Journal Entries:

Date

Account Name

January

Debit

Credit

1

Cash A/C   DR

$5000

     TO Share Capital

$5000

(Being share capital issued for cash)

2

Equipment A/c    DR                            

$3000

     To Creditor

$3000

( Being good purchased for credit)

3

Rent A/C         DR

$600

To Cash A/C

$600

(Being rent paid)

4

Purchased A/C   DR

$3000

    To Supplier A/C

$3000

(Being goods purchased on credit)

5

Debtor A/C DR

$3500

    To Repairs A/C

$3500

(being repairs billed)

6

Supplier A/C   DR

$1500

    To Cash A/c

$1500

(being cash dues paid)

7

Cash A/C

$400

   To Creditor

$400

(being casg received)

8

Cash A/C

$1200

Loss on sale of equipment A/C

$300

    To Equipment A/C

$1500

(being equipment sold)

Part 2:

Part 3 :

Date

Account Name

January

Debit

Credit

1

Cash A/C   DR

$5000

     TO Share Capital

$5000

(Being share capital issued for cash)

2

Equipment A/c    DR                            

$3000

     To Creditor

$3000

( Being good purchased for credit)

3

Rent A/C         DR

$600

To Cash A/C

$600

(Being rent paid)

4

Purchased A/C   DR

$3000

    To Supplier A/C

$3000

(Being goods purchased on credit)

5

Debtor A/C DR

$3500

    To Repairs A/C

$3500

(being repairs billed)

6

Supplier A/C   DR

$1500

    To Cash A/c

$1500

(being cash dues paid)

7

Cash A/C

$400

   To Creditor

$400

(being casg received)

8

Cash A/C

$1200

Loss on sale of equipment A/C

$300

    To Equipment A/C

$1500

(being equipment sold)

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