In Class Practice
Chapter Two
Record the following transactions of Speedy Computer Service, owned by
Bill Smith, for the month of March 2011.
March 1. Bill Smith invested $2000 cash in his business.
15. Bill provided services and received cash amounting to $5,400
from customers.
16. Purchased supplies on account, $100.
17. Paid for gas and oil, $880.
18. Paid salaries, 5,290.
21. Provided service on credit, $600.
28. Bill provided services and received cash amounting to $6,000.
29. Paid for truck and equipment rental, $2,075.
30. Bill withdrew $2000 for personal use.
Required:
1. Record the above transactions in general journal form.
2. Use the trial balance provided to prepare and income statement and a
balance sheet. (This trial balance was taken from the general ledger
after the posting of properly prepared transactions).
3. Explain why the company’s cash balance does not agree with net
income.
Solution:
Chapter Two
GENERAL JOURNAL
DATE
March 1
15
16
17
18
21
28
29
30
ACCOUNT TITLES AND EXPLANATION
Cash
B. Smith, Capital
Receive investment by owner
Cash
Service Fees Earned
Receive payment in cash
Supplies
Accounts Payable
Purchase supplies on credit
Gas & Oil Expense
Cash
Paid for gas & oil with cash
Salaries Expense
Cash
Paid salaries with cash
Accounts Receivable
Service Fees Earned
Provided service on credit
Cash
Service Fees Earned
Received payment for services in
cash
Equipment Rental Expense
Cash
Truck and equipment rental paid in
cash
B. Smith, Withdrawals
Cash
Withdrew money for personal use
DEBIT
2,000
CREDIT
2,000
5,400
100
5,400
100
880
880
5,290
5,290
600
600
6,000
6,000
2,075
2,075
2,000
2,000
Speedy Computer Service
Trial Balance
March 31, 2011
Debit
3,155
600
100
Cash
Accounts Receivable
Supplies
Accounts Payable
B. Smith, Capital
B. Smith, Withdrawals
Service Fees Earned
Gas & Oil Expense
Equipment Rental Expense
Salaries Expense
Totals
2,000
880
2,075
5,290
14,100
Credit
100
2,000
12,000
14,100
2.
Speedy Computer Service
Income Statement
For the month ended March 31, 2011
Fees Earned
Expenses:
Equipment Rental Expense
Gas & Oil Expense
Salary Expense
Total Expenses
Net Income
$ 12,000
2,075
880
5,290
8,245
$ 3,755
3.
Cash
Accounts
Receivable
Supplies
Total Assets
Assets
Speedy Computer Service
Balance Sheet
March 31, 2011
Liabilities and Owner’s Equity
$ 3,155 Accounts Payable
600 B. Smith, Capital
100
$ 3,855
Total Liabilities and
Owner’s Equity
$100
3,755
$ 3,855
First, note that the cash investment ($2,000) and cash withdrawal ($2,000) affect the cash
balance but do not affect the amount of net income earned during the period. Also, revenues
in the amount of $600 (March 21) are reflected in the net income figure, but have not yet
been collected. As such, these revenues did not impact the cash balance.