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Chapter 4: The General Journal and the General Ledger
Chapter Opener: Thinking Critically
Students should recognize that in order to grow, a business must broaden and diversify its product offerings.
Caterpillar recognized quickly that no two jobs are alike and by offering a custom solution to their customers
for each distinct job they were able to generate more sales and more revenue.
Fast Facts
• Approximately half of all Caterpillar sales were to customers outside of the United States, maintaining
Caterpillar’s position as a global supplier and leading U.S. exporter.
• Caterpillar products and components are manufactured in 50 U.S. facilities and in 65 other locations in
23 countries around the globe.
• Caterpillar invested nearly $670 million in research and technology in 2003. Worldwide, employees
earned more than 3700 patents since 1997.
• In 1963 Caterpillar and Mitsubishi Heavy Industries Ltd. formed one of the first joint ventures in Japan to
include partial U.S. ownership. Caterpillar Mitsubishi Ltd. started production in 1965 and is now the
No. 2 maker of construction and mining equipment in Japan.
Accounting on the Job: Thinking Critically
Students’ responses will vary. Issues that would require attention might include:
• changes to travel agent commission policies
• public earnings conference calls
• changes to the corporation’s board of directors
Accounting on the Job: Internet Application
Students will find information on paralegal careers at The National Association of Legal Assistants Web site
(www.nala.org). The U.S. Department of Labor, Bureau of Labor Statistics, Web site offers information about
fire fighting careers at (stats.bls.gov/oco/cg/cg1007.htm) and on correctional officer careers at
(stats.bls.gov/oco/ocos156.htm).
Managerial Implications: Thinking Critically
Answers will vary but may include the following.
• Research a payment to a vendor. (Vendor says no payment was received.)
• Research outstanding customer account. (Customer says account was paid.)
• Research customer billing. (Customer says no invoice was received.)
Discussion Questions
These questions are designed to check students’ understanding of the new terms, concepts, and procedures
presented in the chapter.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Groups of accounts.
Entry that includes more than a single debit and credit—two or more debits and/or credits.
Helps establish audit trail.
Record month, day, debited account/amount, credited account/amount, description.
To record business transactions in chronological order.
Steps performed to classify, record, and summarize financial data for a business.
Before entry posted: cross out incorrect item, write correct data above it. After posted: journalize and
post a correcting entry.
Chain of references; prevents fraud and errors.
Notations of the page number of the journal from which a figure comes; number of account to which the
figure was posted; to provide cross-references.
Assets, liabilities, and owner’s equity first, followed by revenue accounts, then expenses. They are in
order of the financial statements.
Transfer of data from a journal to a ledger.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Exercises
Exercise 4.1
1.
2.
3.
4.
5.
Debit
401
517
111
131
202
Credit
101
101
401
101
101
6.
7.
8.
9.
10.
Debit
101
101
101
121
511
Credit
401
111
301
202
101
Exercise 4.2
GENERAL JOURNAL
Date
Description
2007
Sept. 1
4
16
20
23
30
2007
Sept. 30
30
30
30
Page 1
Post.
Ref.
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marilyn James, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Beginning Investment of owner
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased equipment on credit from Den, Inc.
Invoice 9823, payable in 30 days
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased an automobile, Check 1001
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased supplies, Check 1002
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Returned damaged supplies and
received cash refund
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid Den, Inc., on account for
Invoice 9823, Check 1003
101
301
62,000
131
202
8,500
141
101
22,500
121
101
420
101
121
120
202
101
5,600
Marilyn James, Drawing . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner withdrew cash for personal use
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid October rent, Check 1004
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly telephone bill, Check 1005
302
101
2,000
511
101
1,200
101
401
1,700
517
101
207
36 䡲 Chapter 4
Credit
62,000
8,500
22,500
420
120
5,600
2,000
1,200
1,700
207
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Exercise 4.3
GENERAL LEDGER
ACCOUNT
Date
Cash
Description
2007
Sept 1
16
20
23
30
30
30
30
30
ACCOUNT
Date
ACCOUNT
Date
Date
Date
2007
Sept. 16
Debit
Description
62,000
22,500
420
120
5,600
2,000
1,200
1,700
207
Debit
ACCOUNT NO.
Post.
Ref.
J1
J1
Debit
Description
420
120
J1
Debit
Credit
8,500
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
J1
Debit
131
8,500
Automobile
Description
420
300
ACCOUNT NO.
Post.
Ref.
121
Balance
Debit
Credit
Credit
Equipment
111
Balance
Debit
Credit
Credit
Supplies
Description
62,000
39,500
39,080
39,200
33,600
31,600
30,400
32,100
31,893
ACCOUNT NO.
Post.
Ref.
101
Balance
Debit
Credit
Credit
Accounts Receivable
2007
Sept. 4
ACCOUNT
Post.
Ref.
J1
J1
J1
J1
J1
J2
J2
J2
J2
2007
Sept. 20
23
ACCOUNT
ACCOUNT NO.
Credit
22,500
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
141
Balance
Debit
Credit
22,500
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GENERAL LEDGER
ACCOUNT
Accounts Payable
Date
ACCOUNT NO.
Post.
Ref.
Description
2007
Sept 4
30
ACCOUNT
J1
J1
2007
Sept 1
Description
Post.
Ref.
Debit
Description
2,000
Debit
J2
Description
1,700
2007
Sept. 30
J2
Debit
Credit
1,200
Description
1,700
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
Debit
511
1,200
Salaries Expense
Date
401
Balance
Debit
Credit
Credit
ACCOUNT NO.
Post.
Ref.
302
2,000
Rent Expense
Date
62,000
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Fees Income
2007
Sept. 30
ACCOUNT
62,000
ACCOUNT NO.
J1
Date
8,500
2,900
Balance
Debit
Credit
Credit
Marilyn James, Drawing
2007
Sept 30
ACCOUNT
Debit
J1
Date
ACCOUNT
8,500
5,600
ACCOUNT NO.
Post.
Ref.
Description
Balance
Debit
Credit
Credit
Marilyn James, Capital
Date
ACCOUNT
Debit
202
Credit
514
Balance
Debit
Credit
2007
ACCOUNT
Telephone Expense
Date
2007
Sept. 30
38 䡲 Chapter 4
Description
ACCOUNT NO.
Post.
Ref.
J2
Debit
207
Credit
517
Balance
Debit
Credit
207
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Exercise 4.4
GENERAL JOURNAL
Date
2007
Nov. 5
18
23
Description
PAGE
Post.
Ref.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for Talent Search
receiving part of fees in cash with the
remainder due in 60 days
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased graphing calculator and
supplies, Check 1008
Automobile Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Received Invoice 1602 from Automotive
Technicians Repair; issued Check 1009 for
half the amount, balance due in 30 days
Debit
Credit
16,000
16,000
32,000
300
500
800
1,080
540
540
Exercise 4.5
GENERAL JOURNAL
Date
2007
July 30
Description
PAGE 000
Post.
Ref.
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To correct July 9 error charging
telephone bill to Utilities Expense
Debit
Credit
375
375
Exercise 4.6
GENERAL JOURNAL
Date
2007
Oct. 1
Description
PAGE 000
Post.
Ref.
Repair Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Truck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To correct September 16 error charging
truck repairs to the Truck account
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
Credit
450
450
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Problems
Problem 4.1A
GENERAL JOURNAL
Date
Description
2007
Sept. 1
5
6
10
11
12
15
18
19
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid September rent, Check 1169
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on credit
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly telephone bill, Check 1170
Equipment Repair Expense . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for repairs, Check 1171
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salaries, Checks 1172–1177
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for supplies, Check 1178
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased tennis rackets from The Tennis
Supply Shop, Invoice 3108, payable in 30 days
40 䡲 Chapter 4
PAGE 1
Post.
Ref.
Debit
Credit
1,400
1,400
2,500
2,500
2,175
2,175
150
150
210
210
800
800
4,200
4,200
500
500
2,250
2,250
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GENERAL JOURNAL
Date
2007
Sept. 20
21
21
22
23
26
28
30
30
Description
PAGE 2
Post.
Ref.
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased nets, Check 1179
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Returned damaged net for cash refund
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on account
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for supplies, Check 1180
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly electric bill, Check 1181
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salaries, Checks 1182–1187
Raul Hinojosa, Drawing . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner withdrew cash for personal use, Check 1188
Debit
Credit
690
690
850
850
212
212
3,260
3,260
4,810
4,810
460
460
575
575
4,200
4,200
1,000
1,000
Analyze: Check 1189 would be included in the journal entry description.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Problem 4.2A
GENERAL JOURNAL
Date
Description
2007
Oct. 1
2
5
6
7
10
12
15
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Linda Carter, Capital . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid October rent, Check 1001
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased equipment from Office Furniture Mart,
Inc., Invoice 6704, payable in 60 days
Art Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased art equipment, Check 1002
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased supplies, Check 1003
Office Cleaning Expense . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for office cleaning, Check 1004
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash and on credit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Returned damaged supplies for cash refund
42 䡲 Chapter 4
PAGE 1
Post.
Ref.
Debit
101
301
70,000
514
101
2,250
141
202
14,000
151
101
4,350
121
101
1,070
511
101
425
101
111
401
3,200
2,800
101
121
300
Credit
70,000
2,250
14,000
4,350
1,070
425
6,000
300
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GENERAL JOURNAL
Date
2007
Oct. 18
20
26
27
30
30
30
Description
PAGE 2
Post.
Ref.
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased equipment from Office Furniture Mart,
Inc., Invoice 7108; Check 1005; bal. due in 30 days
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid Office Furniture Mart, Inc., on account,
Invoice 6704; Check 1006
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on credit
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly telephone bill, Check 1007
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly utility bill, Check 1008
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly salaries, Checks 1009–1011
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
141
101
202
2,050
202
101
7,000
111
401
3,875
520
101
250
101
111
3,200
523
101
592
517
101
7,550
Credit
1,025
1,025
7,000
3,875
250
3,200
592
7,550
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GENERAL LEDGER
ACCOUNT
Cash
Date
Description
2007
Oct. 1
2
6
7
10
12
15
18
20
27
30
30
30
ACCOUNT
Debit
Description
70,000
2,250
4,350
1,070
425
3,200
300
1,025
7,000
250
3,200
592
7,550
J1
J2
J2
Debit
Description
2,800
3,875
3,200
2007
Oct. 7
15
J1
J1
Debit
2007
Oct. 5
18
44 䡲 Chapter 4
Description
1,070
300
1,070
770
ACCOUNT NO.
Post.
Ref.
J1
J2
Debit
14,000
2,050
Credit
121
Balance
Debit
Credit
Credit
Office Equipment
Date
2,800
6,675
3,475
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Supplies
Date
70,000
67,750
63,400
62,330
61,905
65,105
65,405
64,380
57,380
57,130
60,330
59,738
52,188
ACCOUNT NO.
Post.
Ref.
101
Balance
Debit
Credit
Credit
Accounts Receivable
2007
Oct. 12
26
30
ACCOUNT
Post.
Ref.
J1
J1
J1
J1
J1
J1
J1
J2
J2
J2
J2
J2
J2
Date
ACCOUNT
ACCOUNT NO.
141
Balance
Debit
Credit
14,000
16,050
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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GENERAL LEDGER
ACCOUNT
Date
Art Equipment
Description
2007
Oct. 6
ACCOUNT
Date
Date
Date
ACCOUNT
Date
2007
Oct. 12
26
Debit
Description
4,350
4,350
ACCOUNT NO.
Post.
Ref.
J1
J2
J2
Debit
14,000
1,025
7,000
Debit
J1
70,000
Debit
ACCOUNT NO.
Post.
Ref.
J1
J2
Debit
Credit
6,000
3,875
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
302
Balance
Debit
Credit
Credit
Fees Income
Description
70,000
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Linda Carter, Drawing
Description
14,000
15,025
8,025
ACCOUNT NO.
Post.
Ref.
202
Balance
Debit
Credit
Credit
Linda Carter, Capital
Description
151
Balance
Debit
Credit
Credit
Accounts Payable
2007
Oct. 1
ACCOUNT
Post.
Ref.
J1
2007
Oct. 5
18
20
ACCOUNT
ACCOUNT NO.
401
Balance
Debit
Credit
6,000
9,875
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GENERAL LEDGER
ACCOUNT
Office Cleaning Expense
Date
Description
ACCOUNT NO.
Post.
Ref.
2007
Oct. 10
ACCOUNT
Description
Post.
Ref.
Debit
Credit
2,250
Description
J2
Debit
Credit
7,550
Description
2007
Oct. 27
J2
Debit
Credit
250
2007
Oct. 30
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
J2
Debit
520
250
Utilities Expense
Date
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
517
7,550
Telephone Expense
Date
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
514
2,250
Salaries Expense
2007
Oct. 30
ACCOUNT
ACCOUNT NO.
J1
Date
Balance
Debit
Credit
425
Rent Expense
2007
Oct. 2
ACCOUNT
Credit
425
Date
ACCOUNT
Debit
511
Credit
592
523
Balance
Debit
Credit
592
Analyze: General ledger account 202 has a $8,025 credit balance.
46 䡲 Chapter 4
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Problem 4.3A
April 1: The debit should be to Accounts Receivable, not Accounts Payable.
April 2: The debit and credit accounts are reversed. Telephone Expense should be debited and Cash should
be credited.
April 3: The two debit amounts and the credit amount in the entry are not equal because of a math error.
The credit for Cash should be $4,000.
Analyze: After correcting the three entries, the assets are increased by $5,900.
Problem 4.4A
GENERAL JOURNAL
Date
Description
2007
Nov. 1
2
10
20
PAGE 1
Post.
Ref.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sandra Altman, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased equipment and office supplies from
Office Depot, Invoice 501; issued Check 100 for
a down payment, balance payable in 30 days
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services for cash and credit
Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased machinery from Carson Machinery,
Inc., Invoice 709; issued Check 101 for a down
payment, balance due in 30 days
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
101
131
301
22,500
500
151
121
101
202
975
225
101
111
401
250
700
141
101
202
1,500
Credit
23,000
300
900
950
500
1,000
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GENERAL LEDGER
ACCOUNT
Cash
Date
Description
2007
Nov. 1
2
10
20
ACCOUNT
Description
Post.
Ref.
22,500
300
250
500
Debit
Credit
700
2007
Nov. 2
Post.
Ref.
Debit
Credit
225
2007
Nov. 1
J1
Debit
Credit
500
2007
Nov. 20
48 䡲 Chapter 4
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
J1
Debit
1,500
131
500
Machinery
Date
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
121
225
Tools
Description
111
Balance
Debit
Credit
ACCOUNT NO.
J1
Date
22,500
22,200
22,450
21,950
700
Office Supplies
Description
101
Balance
Debit
Credit
Credit
ACCOUNT NO.
J1
Date
ACCOUNT
Debit
Accounts Receivable
2007
Nov. 10
ACCOUNT
Post.
Ref.
J1
J1
J1
J1
Date
ACCOUNT
ACCOUNT NO.
Credit
141
Balance
Debit
Credit
1,500
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GENERAL LEDGER
ACCOUNT
Date
Equipment
Description
2007
Nov. 2
ACCOUNT
Date
Date
Date
2007
Nov. 10
Debit
Description
975
975
ACCOUNT NO.
Post.
Ref.
Debit
J1
J1
900
1,000
Debit
J1
23,000
23,000
ACCOUNT NO.
Post.
Ref.
Debit
J1
301
Balance
Debit
Credit
Credit
Fees Income
Description
900
1,900
ACCOUNT NO.
Post.
Ref.
202
Balance
Debit
Credit
Credit
Sandra Altman, Capital
Description
151
Balance
Debit
Credit
Credit
Accounts Payable
2007
Nov. 1
ACCOUNT
Post.
Ref.
J1
2007
Nov. 2
20
ACCOUNT
ACCOUNT NO.
Credit
950
401
Balance
Debit
Credit
950
Analyze: The business owes $1,900 as of November 30.
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Problem 4.1B
GENERAL JOURNAL
Date
Description
2007
Sept. 1
5
6
7
9
10
12
14
18
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Wu, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid rent for September, Check 1000
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on credit
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid telephone bill, Check 1001
Equipment Repair Expense . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for equipment repairs, Check 1002
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salaries to employees,
Checks 1003–1004
Cleaning Supplies Expense . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for cleaning supplies, Check 1005
50 䡲 Chapter 4
PAGE 1
Post.
Ref.
Debit
Credit
25,000
25,000
2,800
2,800
1,800
1,800
3,600
3,600
400
400
230
230
975
975
9,000
9,000
700
700
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GENERAL JOURNAL
Date
2007
Sept. 19
20
22
24
26
30
30
Description
PAGE 2
Post.
Ref.
Office Supplies Expense . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for office supplies, Check 1006
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase from Ramon’s Equipment, Inc.,
Invoice 1012; issued Check 1007
for down payment, balance due in 30 days
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid utility bill, Check 1008
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on account
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salaries, Checks 1009–1010
Fred Wu, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner withdrew cash for personal use,
Check 1011
Debit
Credit
600
600
6,000
2,000
4,000
4,950
4,950
425
425
3,600
3,600
9,000
9,000
3,000
3,000
Analyze: Eight transactions affected expense accounts.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Problem 4.2B
GENERAL JOURNAL
Date
Description
2007
June 1
2
5
6
7
10
12
15
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Harris, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid rent for June, Check 1001
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased office equipment from Brown, Inc.,
Invoice 5312, payable in 60 days
Photographic Equipment . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased photo equipment, Check 1002
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased supplies, Check 1003
Office Cleaning Expense . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for office cleaning, Check 1004
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash and credit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Returned damaged supplies for cash
52 䡲 Chapter 4
PAGE 1
Post.
Ref.
Debit
101
301
32,000
514
101
1,800
141
202
7,500
151
101
1,900
121
101
475
511
101
400
101
111
401
1,200
1,300
101
121
100
Credit
32,000
1,800
7,500
1,900
475
400
2,500
100
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Page 53
GENERAL JOURNAL
Date
2007
June 18
20
26
27
30
30
30
Description
PAGE 2
Post.
Ref.
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase from Craft Office Supply,
Invoice 304; issued Check 1005 for
down payment, balance payable in 30 days
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid Brown, Inc., on account, Invoice 5312,
Check 1006
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on credit
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly phone bill, Check 1007
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received cash on account
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly utility bill, Check 1008
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid monthly salaries to employees,
Checks 1009–1011
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
141
101
202
2,050
202
101
4,200
111
401
2,000
520
101
145
101
111
2,100
523
101
550
517
101
5,600
Credit
1,000
1,050
4,200
2,000
145
2,100
550
5,600
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GENERAL LEDGER
ACCOUNT
Cash
Date
Description
2007
June 1
2
6
7
10
12
15
18
20
27
30
30
30
ACCOUNT
Debit
Description
32,000
1,800
1,900
475
400
1,200
100
1,000
4,200
145
2,100
550
5,600
J1
J2
J2
Debit
Description
1,300
2,000
2,100
2007
June 7
15
J1
J1
Debit
2007
June 5
18
54 䡲 Chapter 4
Description
475
100
475
375
ACCOUNT NO.
Post.
Ref.
J1
J2
Debit
7,500
2,050
Credit
121
Balance
Debit
Credit
Credit
Office Equipment
Date
1,300
3,300
1,200
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Supplies
Date
32,000
30,200
28,300
27,825
27,425
28,625
28,725
27,725
23,525
23,380
25,480
24,930
19,330
ACCOUNT NO.
Post.
Ref.
101
Balance
Debit
Credit
Credit
Accounts Receivable
2007
June 12
26
30
ACCOUNT
Post.
Ref.
J1
J1
J1
J1
J1
J1
J1
J2
J2
J2
J2
J2
J2
Date
ACCOUNT
ACCOUNT NO.
141
Balance
Debit
Credit
7,500
9,550
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GENERAL LEDGER
ACCOUNT
Date
Photographic Equipment
Description
2007
June 6
ACCOUNT
Date
Date
Date
ACCOUNT
Date
Description
Date
2007
June 10
Post.
Ref.
1,900
Debit
1,900
7,500
1,050
4,200
Debit
J1
32,000
Debit
ACCOUNT NO.
Post.
Ref.
Debit
J1
J2
Description
2,500
2,000
2,500
4,500
ACCOUNT NO.
Post.
Ref.
J1
Debit
Credit
400
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
Office Cleaning Expense
302
Balance
Debit
Credit
Credit
Fees Income
Description
32,000
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Richard Harris, Drawing
Description
7,500
8,550
4,350
ACCOUNT NO.
Post.
Ref.
202
Balance
Debit
Credit
Credit
Richard Harris, Capital
Description
151
Balance
Debit
Credit
Credit
ACCOUNT NO.
J1
J2
J2
2007
June 12
26
ACCOUNT
Debit
Accounts Payable
2007
June 1
ACCOUNT
Post.
Ref.
J1
2007
June 5
18
20
ACCOUNT
ACCOUNT NO.
511
Balance
Debit
Credit
400
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GENERAL LEDGER
ACCOUNT
Rent Expense
Date
Description
2007
June 2
ACCOUNT
Debit
Description
1,800
1,800
ACCOUNT NO.
Post.
Ref.
J2
Debit
Description
5,600
5,600
2007
June 27
ACCOUNT NO.
Post.
Ref.
J2
Debit
2007
June 30
Description
145
145
ACCOUNT NO.
Post.
Ref.
J2
Debit
520
Balance
Debit
Credit
Credit
Utilities Expense
Date
517
Balance
Debit
Credit
Credit
Telephone Expense
Date
514
Balance
Debit
Credit
Credit
Salaries Expense
2007
June 30
ACCOUNT
Post.
Ref.
J1
Date
ACCOUNT
ACCOUNT NO.
Credit
550
523
Balance
Debit
Credit
550
Analyze: The Cash account balance after the June 20 transaction was $23,525.
56 䡲 Chapter 4
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Problem 4.3B
January 1: The debit should be to Accounts Receivable, not Accounts Payable.
January 2: The debit and credit accounts are reversed. Telephone Expense should be debited, and Cash
should be credited.
January 3: The two debit amounts and the credit amount in the entry are not equal because of a
mathematical error. The credit shown for Cash should be $940.
Analyze: The assets increased by $610.
Problem 4.4B
GENERAL JOURNAL
Date
Description
2007
Dec. 3
4
5
6
10
11
15
PAGE 1
Post.
Ref.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia Richey, Capital . . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid cash for computer
Furniture & Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased office furniture on credit
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid cash for equipment
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rendered services on account
Office Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid cash for supplies
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid invoice for furniture purchased on
December 5
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
101
301
30,000
131
101
2,400
151
202
8,000
141
101
2,190
111
401
2,575
121
101
900
202
101
8,000
Credit
30,000
2,400
8,000
2,190
2,575
900
8,000
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GENERAL LEDGER
ACCOUNT
Cash
Date
Description
2007
Dec. 3
4
6
11
15
ACCOUNT
Description
Post.
Ref.
30,000
2,400
2,190
900
8,000
Debit
Credit
2,575
2007
Dec. 11
Post.
Ref.
Debit
Credit
900
2007
Dec. 4
J1
Debit
Credit
2,400
2007
Dec. 6
58 䡲 Chapter 4
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
J1
Debit
2,190
131
2,400
Office Equipment
Date
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
121
900
Computers
Description
111
Balance
Debit
Credit
ACCOUNT NO.
J1
Date
30,000
27,600
25,410
24,510
16,510
2,575
Office Supplies
Description
101
Balance
Debit
Credit
Credit
ACCOUNT NO.
J1
Date
ACCOUNT
Debit
Accounts Receivable
2007
Dec. 10
ACCOUNT
Post.
Ref.
J1
J1
J1
J1
J1
Date
ACCOUNT
ACCOUNT NO.
Credit
141
Balance
Debit
Credit
2,190
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GENERAL LEDGER
ACCOUNT
Date
Furniture & Fixtures
Description
2007
Dec. 5
ACCOUNT
Date
Date
Date
2007
Dec. 10
Debit
Description
8,000
8,000
ACCOUNT NO.
Post.
Ref.
J1
J1
Debit
8,000
Debit
J1
30,000
30,000
ACCOUNT NO.
Post.
Ref.
Debit
J1
301
Balance
Debit
Credit
Credit
Fees Income
Description
8,000
-0-
8,000
ACCOUNT NO.
Post.
Ref.
202
Balance
Debit
Credit
Credit
Virginia Richey, Capital
Description
151
Balance
Debit
Credit
Credit
Accounts Payable
2007
Dec. 3
ACCOUNT
Post.
Ref.
J1
2007
Dec. 5
15
ACCOUNT
ACCOUNT NO.
Credit
2,575
401
Balance
Debit
Credit
2,575
Analyze: Two postings were recorded, one debit and one credit.
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Challenge Problem
GENERAL JOURNAL
Date
Description
2007
June 1
2
3
4
6
7
8
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nelson Sullivan, Capital . . . . . . . . . . . . . . . . . . . . . . .
Beginning investment of owner
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid rent for June, Check 201
Office Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased furniture from Davis
Office Supply, Invoice 5103; issued
Check 202, balance due in 30 days
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased supplies, Check 203
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid for advertising, Check 204
Recording Equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased equipment from Rhythms and
Moves, Inc., Invoice 2122; issued check 205,
balance due in 30 days
60 䡲 Chapter 4
PAGE 1
Post.
Ref.
Debit
101
301
30,000
514
101
1,800
141
101
202
12,000
121
101
1,600
101
401
6,000
511
101
2,000
151
101
202
15,000
Credit
30,000
1,800
4,000
8,000
1,600
6,000
2,000
5,000
10,000
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GENERAL JOURNAL
Date
2007
June 10
11
12
15
18
20
25
27
Description
PAGE 2
Post.
Ref.
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services on account
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid Davis Office Supply on account
for Invoice 5103, Check 206
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performed services for cash
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salary, Check 207
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . .
Received payment on account
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid Rhythms and Moves, Inc.,
on account, Invoice 2122, Check 208
Telephone Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid telephone bill, Check 209
Utilities Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid utility bill, Check 210
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Debit
111
401
4,900
202
101
3,000
101
401
9,000
517
101
5,000
101
111
4,000
202
101
6,000
520
101
350
523
101
800
Credit
4,900
3,000
9,000
5,000
4,000
6,000
350
800
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GENERAL JOURNAL
Date
2007
June 28
30
PAGE 3
Post.
Ref.
Description
Nelson Sullivan, Drawing . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner withdrew cash for personal use,
Check 211
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid semimonthly salary, Check 212
Debit
302
101
4,000
517
101
5,000
Credit
4,000
5,000
GENERAL LEDGER
ACCOUNT
Cash
Date
2007
June 1
2
3
4
6
7
8
11
12
15
18
20
25
27
28
30
62 䡲 Chapter 4
Description
ACCOUNT NO.
Post.
Ref.
J1
J1
J1
J1
J1
J1
J1
J2
J2
J2
J2
J2
J2
J2
J3
J3
Debit
Credit
30,000
1,800
4,000
1,600
6,000
2,000
5,000
3,000
9,000
5,000
4,000
6,000
350
800
4,000
5,000
101
Balance
Debit
Credit
30,000
28,200
24,200
22,600
28,600
26,600
21,600
18,600
27,600
22,600
26,600
20,600
20,250
19,450
15,450
10,450
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GENERAL LEDGER
ACCOUNT
Date
Accounts Receivable
Description
2007
June 10
18
ACCOUNT
Date
Date
Date
Description
Date
2007
June 3
8
11
20
Post.
Ref.
4,900
4,000
Debit
1,600
Post.
Ref.
Debit
12,000
12,000
ACCOUNT NO.
J1
Debit
15,000
15,000
ACCOUNT NO.
Post.
Ref.
J1
J1
J2
J2
Debit
151
Balance
Debit
Credit
Credit
Accounts Payable
Description
141
Balance
Debit
Credit
Credit
Recording Equipment
Post.
Ref.
121
1,600
ACCOUNT NO.
J1
Description
4,900
900
Balance
Debit
Credit
Credit
Office Furniture
Description
111
Balance
Debit
Credit
Credit
ACCOUNT NO.
J1
2007
June 8
ACCOUNT
Debit
Supplies
2007
June 3
ACCOUNT
Post.
Ref.
J2
J2
2007
June 4
ACCOUNT
ACCOUNT NO.
Credit
8,000
10,000
3,000
6,000
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
202
Balance
Debit
Credit
8,000
18,000
15,000
9,000
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GENERAL LEDGER
ACCOUNT
Nelson Sullivan, Capital
Date
Post.
Ref.
Description
2007
June 1
ACCOUNT
Description
J3
Debit
Description
2007
June 6
10
12
4,000
Post.
Ref.
Debit
6,000
4,900
9,000
2007
June 7
J1
Debit
Credit
2,000
2007
June 2
64 䡲 Chapter 4
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
J1
Debit
1,800
511
2,000
Rent Expense
Date
6,000
10,900
19,900
ACCOUNT NO.
Post.
Ref.
401
Balance
Debit
Credit
Credit
Advertising Expense
Description
302
4,000
ACCOUNT NO.
J1
J2
J2
Date
30,000
Balance
Debit
Credit
Credit
Fees Income
Date
ACCOUNT
30,000
ACCOUNT NO.
Post.
Ref.
301
Balance
Debit
Credit
Credit
Nelson Sullivan, Drawing
2007
June 28
ACCOUNT
Debit
J1
Date
ACCOUNT
ACCOUNT NO.
Credit
514
Balance
Debit
Credit
1,800
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GENERAL LEDGER
ACCOUNT
Salaries Expense
Date
Description
2007
June 15
30
ACCOUNT NO.
Post.
Ref.
Debit
J2
J2
ACCOUNT
Credit
5,000
5,000
Description
2007
June 25
ACCOUNT NO.
Post.
Ref.
Debit
J2
ACCOUNT
Credit
350
Description
2007
June 27
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
Debit
J2
520
350
Utilities Expense
Date
Balance
Debit
Credit
5,000
10,000
Telephone Expense
Date
517
Credit
800
523
Balance
Debit
Credit
800
MOVES AND SOUNDS TALENT AGENCY
Trial Balance
June 30, 2007
Account Name
Debit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office Furniture . . . . . . . . . . . . . . . . . . . . . .
Recording Equipment . . . . . . . . . . . . . . . . .
Accounts Payable . . . . . . . . . . . . . . . . . . . .
Nelson Sullivan, Capital . . . . . . . . . . . . . . .
Nelson Sullivan, Drawing . . . . . . . . . . . . . .
Fees Income . . . . . . . . . . . . . . . . . . . . . . . .
Advertising Expense . . . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . . . .
10,450
900
1,600
12,000
15,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58,900
Credit
9,000
30,000
4,000
19,900
2,000
1,800
10,000
350
800
58,900
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MOVES AND SOUNDS TALENT AGENCY
Income Statement
Month Ended June 30, 2007
Revenue
Fees Income . . . . . . . . . . . . . . . . . . . . . .
Expenses
Advertising Expense . . . . . . . . . . . . . . . .
Rent Expense . . . . . . . . . . . . . . . . . . . . .
Salaries Expense . . . . . . . . . . . . . . . . . .
Telephone Expense . . . . . . . . . . . . . . . .
Utilities Expense . . . . . . . . . . . . . . . . . . .
19,900
2,000
1,800
10,000
350
800
Total Expenses . . . . . . . . . . . . . . . . . .
14,950
Net Income . . . . . . . . . . . . . . . . . . . . . . . . .
4,950
MOVES AND SOUNDS TALENT AGENCY
Statement of Owner’s Equity
Month Ended June 30, 2007
Nelson Sullivan, Capital, June 1, 2007 . . . .
Net Income for Month . . . . . . . . . . . . . . . . .
Less Withdrawals for June . . . . . . . . . . . . .
30,000
4,950
4,000
Decrease in Owner’s Equity . . . . . . . . . . . .
950
Nelson Sullivan, Capital, June 30, 2007 . . .
30,950
MOVES AND SOUNDS TALENT AGENCY
Balance Sheet
June 30, 2007
Assets
Liabilities
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 10,450
Accounts Payable . . . . . . . . . . . . . . . . 9,000
Accounts Receivable . . . . . . . . . . . . .
900
Supplies . . . . . . . . . . . . . . . . . . . . . . . 1,600
Office Furniture . . . . . . . . . . . . . . . . . 12,000
Owner’s Equity
Recording Equipment . . . . . . . . . . . . 15,000
Nelson Sullivan, Capital . . . . . . . . . . . . 30,950
Total Assets . . . . . . . . . . . . . . . . . . . . 39,950
Total Liabilities and Owner’s Equity . . . 39,950
Analyze: There were 16 postings in the Cash account.
66 䡲 Chapter 4
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Critical Thinking Problem
Income Statement Errors:
1. The third line of the heading is incorrect; this line must indicate the time period covered by the income
statement.
2. Drawing is not an expense but a reduction of owner’s equity and is included in the calculation of ending
owner’s equity, not on the income statement.
3. Arithmetic errors were made in adding column of expenses and in subtracting total expenses from
revenue.
Balance Sheet Errors:
1. The third line of the heading is incorrect; the balance sheet is identified by the last day of the accounting
period.
2. Accounts Payable and Accounts Receivable are classified incorrectly; they should be interchanged.
Accounts Payable is a liability and Accounts Receivable is an asset.
3. The assets are not listed in the correct order.
4. The amount for Owner’s Equity on the balance sheet should be the ending owner’s equity, not the
beginning owner’s equity. A statement of owner’s equity should be prepared to compute ending owner’s
equity.
KIRVEN CHEMICAL SUPPLY
Income Statement
Month Ended April 30, 2007
Revenue
Fees Income . . . . . . . . . . . . . . . . . . . . . .
18,300
Expenses
Salaries Expense . . . . . . . . . . . . . . . . . .
4,500
Rent Expense . . . . . . . . . . . . . . . . . . . . .
900
Repair Expense . . . . . . . . . . . . . . . . . . .
150
Utilities Expense . . . . . . . . . . . . . . . . . . .
850
Total Expenses . . . . . . . . . . . . . . . . . .
6,400
Net Income . . . . . . . . . . . . . . . . . . . . . . . . .
11,900
KIRVEN CHEMICAL SUPPLY
Statement of Owner’s Equity
Month Ended April 30, 2007
Joe Kirven, Capital, April 1, 2007 . . . . . . . .
Net Income for April . . . . . . . . . . . . . . . . . .
Less Withdrawals for April . . . . . . . . . . . . .
24,600
11,900
2,000
Increase in Capital . . . . . . . . . . . . . . . . . . .
9,900
Joe Kirven, Capital, April 30, 2007 . . . . . . .
34,500
KIRVEN CHEMICAL SUPPLY
Balance Sheet
April 30, 2007
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Accounts Receivable . . . . . . . . . . . . . 3,500
Land . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Building . . . . . . . . . . . . . . . . . . . . . . . 20,000
Liabilities
Accounts Payable . . . . . . . . . . . . . . . .
Owner’s Equity
Joe Kirven, Capital . . . . . . . . . . . . . . . 34,500
Total Assets . . . . . . . . . . . . . . . . . . . . 37,000
Total Liabilities and Owner’s Equity . . . 37,000
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
2,500
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Business Connections
Managerial Focus
1. Journal: detailed chronological record. Ledger: permanent, classified record of all financial events.
2. To assure accuracy and safeguards against fraud.
3. For prompt and accurate journalizing of all transactions.
4. Inefficient flow of information; errors and insufficient information.
Ethical Dilemma
You must check to see if the cash account is going down because of her actions. Is Louisa keeping the cash
from the reversed sales because she has made so many errors? Is this something she does each month? It
is unethical to accept a dinner for “fixing” her error.
Streetwise
1. 1,295,185,000 customer transactions. Accounts Receivable and Sales.
2. a) Selling and Store Operating/Cash, b) Selling and Store Operating/Cash, c) Cash/Accounts
Receivable.
Financial Statement Analysis
1. Debit Transportation Equipment account, credit Accounts Payable.
2. Invoice from the supplier.
3. Dates for equipment purchases, posting reference, purchase amount, account balance ($1,269 million
at January 31, 2004).
Analyze Online: Answers will vary depending on the year.
Extending the Thought
Answers will vary. Students may list organizers such as a diary, a calendar, an address book, a day-timer, or
electronic devices such as a Visor or Palm Pilot. These records and devices help keep track of
appointments, contact names and numbers, schedules, and daily events.
Business Communication
The step-by-step guides created will vary. Students’ guides should offer steps that prompt the new
accounting clerk to record the month and day of the transaction, the debited account name, the debit
amount, the credited account name, the credit amount, and the description for the entry. Ideally, the step-bystep guide will include the appropriate indents and order that entries should be made.
Team Work
Journal Entry to General Ledger to Trial Balance to Financial Statement
Internet Connection
Sites that might be displayed are: www.careerbank.com, www.careersinaccounting.com, www.account.com.
Suggested experience would require 5 years or more, with an AA degree. Skills would include good
communication skills, detailed and multi-task oriented.
68 䡲 Chapter 4
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Practice Test Answer Key
Part A
1. i
2. h
3. d
4. e
5. c
6. g
7. a
8. f
9. b
10. j
Matching
Part B Completion
1. debit
2. year
3. chronological or date
4. assets or balance sheet accounts
5. posted
6. ledger
7. posting references
8. brief or concise
9. credit
10. debit
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 4 䡲 69