Chapter 4 Review Key
1. Complete the following sentences by inserting the correct word or words (some many be used more
than once)
Debit
credit
ledger
trial balance
dollar value
exceptional
taking off
ledger out of balance
debited
credited
a) A group or file of accounts is known as a ledger.
b) A debtor’s account normally has a debit balance.
c) The balance in the liability account is on the credit side.
d) Liabilities increase on the credit side.
e) The accounts appearing on the left side of the accounting equation normally have debit balances.
f) The account balance gives the dollar value of an account and shows whether it is a debit
or a credit.
g) If the owner makes a withdrawal of cash from the business, the Bank account is credited and
the Capital account is debited. (Choose debit or credit.)
h) The balance in the Bank Loan account is usually a credit balance.
i) The listing of the account balances in a ledger is referred to as a trial balance.
j) When cash is paid to a creditor, the creditor’s account is debited. (Choose debit or credit.)
k) A ledger out of balance is a sign that an error has been made in the accounts.
l) A debit balance in a liability account is called a(n) exceptional balance.
m) The whole process of preparing a trial balance is called taking off (two words) a trial balance.
2. Listed below are the transactions for Thunderbolt Electric Repairs owned by Nadia Kupski. Examine
these transactions and complete your analysis on the transaction analysis sheet provided. Write the
debit portion of each transaction before the credit portion.
a. Purchased $50 of supplies and paid cash.
b. Received $150 cash from C. Mourseau, a debtor.
c. Repaired a motor for a customer and received $200 cash.
d. Paid $100 cash to Cannon Co., a creditor.
e. The owner, Nadia Kupski, withdrew $400 cash from the business for her personal use.
f. Paid $250 for repairs to the delivery truck, which was damaged in a collision.
g. Performed a repair service for Jack Wiley at a price of $185, but Mr. Wiley did not pay immediately.
h. Purchased a new printer for the office from DPI Solutions at a cost of $750. Paid $200 cash at the time of
the purchase, with the balance to be paid later.
i. Paid $400 cash to the bank for reducing the bank loan.
j. Threw out supplies worth $75 that were spoiled by a water leak.
No.
.
Account Names
Asset, Liability, or
Owner’s Equity
Increase (+) or
Decrease (–)
Debit or Credit
Amount
1)
Supplies
Bank
A
A
+
–
Dr
Cr
50
50
2)
Bank
A/R—C. Mourseau
A
A
+
–
Dr
Cr
150
150
3)
Bank
A
+
Dr
200
1
N. Kupski, Capital
OE
+
Cr
200
4)
A/P—Cannon Co.
Bank
L
A
–
–
Dr
Cr
100
100
5)
N. Kupski, Capital
Bank
OE
A
–
–
Dr
Cr
400
400
6)
N. Kupski, Capital
Bank
OE
A
–
–
Dr
Cr
250
250
7)
A/R—J. Wiley
N. Kupski, Capital
A
OE
+
+
Dr
Cr
185
185
8)
Office Equipment
Bank
A/P—DPI Solutions
A
A
L
+
–
+
Dr
Cr
Cr
750
200
550
9)
Bank Loan
Bank
L
A
–
–
Dr
Cr
400
400
OE
A
–
–
Dr
Cr
75
75
10)
3.
N. Kupski, Capital
Supplies
Study the error situations listed below and indicate whether they would or would not cause the trial
balance to be out of balance. If you decide that the trial balance would be out of balance, state by
how much.
Error Situation
2
Trial Balance will not be out
of balance (show with
a check mark).
Trial Balance will be out
of balance by amount
shown below
1.
As a result of an addition error, the Bank
account was overstated by $100.
$100
2.
An account balance of $360 was transferred
to the wrong side of the trial balance.
$720
3.
An account balance of $230 was transferred
to the trial balance as $320.
$90
4.
A debit of $50 to Supplies was recorded
to Equipment.
5.
When transferring the account balances to the
trial balance, one of the account balances in
the amount of $75 was missed.

$75
.
4. Karen Huntley, an accountant, owns a business with the following assets and liabilities:
Assets
Bank
A/R—R. Fawcett
A/R—O. Reingold
A/R—R. Steffan
Supplies
Equipment
Automobile
$ 4 000
300
2 500
700
800
12 000
10 000
Liabilities
A/P—A. Borg & Son
A/P—Familiar Finance
A/P—Proctor’s Ltd.
$1 000
3 000
700
a) Set up the financial position of Karen Huntley in T-accounts.
b) In these T-accounts, record the accounting entries for the transactions listed below:
1. Received $2 500 cash from O. Reingold in payment of his debt to the business.
2. Paid $1 000 cash to A. Borg & Son.
3. The owner withdrew $500 cash from the business for her personal use.
4. Performed an accounting service for R. Fawcett at a price of $370. Mr. Fawcett will pay
for the service later.
5. Paid $200 cash to repair the office air conditioner (included in the Equipment figure).
6. Performed an accounting service for Chris Scott. He paid $200 cash.
7. Received $500 cash for an old computer. The computer is included in the Equipment figure
at $2 000.
8. Huntley paid $75 cash for supplies. She paid for these supplies out of her own funds.
9. Purchased a printer at a cost of $800 from Proctor’s Limited. Paid cash.
c) Calculate and record the balances in the accounts.
3
ASSETS
1
6
7
Bank
4 000
2 500
200
500
1 000
500
200
800
2
3
5
9
4
A/R—R. Fawcett
300
370
A/R—O. Reingold
2 500
2 500
670
1
0
4 700
A/R—R. Steffan
700
8
Supplies
800
75
875
9
Equipment
12 000
2 000
800
7
10 800
Automobile
10 000
LIABILITIES AND EQUITY
2
A/P—A. Borg & Son
1 000
1 000
A/P—Familiar Finance
3 000
A/P—Proctor’s Ltd.
700
0
3
5
7
K. Huntley, Capital
500
25 600
200
370
1 500
200
75
4
6
8
24 045
4
.
d)
Take off a trial balance dated October 31, 20—, to see if the ledger is in balance.
Karen Huntley
Trial Balance
October 31, 20—
Accounts
Bank
Debits
Credits
4 700
A/R—R. Fawcett
670
A/R—P. Steffan
700
Supplies
875
Equipment
10 800
Automobile
10 000
A/P—Familiar Finance
3 000
A/P—Proctor’s Ltd.
700
24 045
K. Huntley, Capital
27 745
27 745
5