2, Selected transactions for ABC company, in its first month of business, are shown below.
Jan. (2) invested 15000 cash in the business in exchange for ordinary shares.
Jan(3) purchased used car for 7000 700 cash for use in the business.
Jan (9) purchased supplies on account for 500.
Jan. (11) billed customers 1800 for services performed.
Jan.(16) paid 200 cash for advertising.
Jan.(20) received 700 cash from customers billed on January 11.
Jan.(23) paid creditor 300 cash on balance awed.
Jan.(28) declared and paid a 1000 cash dividend.
Instructions.
For each transaction indicate the following.
(a) the basic type of account debited and credited (asset, liability, equity).
(b) the specific account debited and credited (cash, rent, expense, service revenue, e+c.)
(c) whether the specific account is increased or decreased.
(d) the normal balance of the specific account.
(e) Journalize each transaction?
Transaction 1:
(a) Account debited: Cash (asset)
Account credited: Equity
(b) Specific account debited: Cash
Specific account credited: Ordinary shares
(c) Cash is decreased, Equity is increased
(d) Normal balance of Cash: Debit
Normal balance of Equity: Credit
(e) The journal entry for this transaction would be:
Cash 15000
Equity 15000
Transaction 2:
(a) Account debited: Asset
Account credited: Cash (asset)
(b) Specific account debited: Used car
Specific account credited: Cash
(c) Used car is increased, Cash is decreased
(d) Normal balance of Used car: Debit
Normal balance of Cash: Debit
(e) The journal entry for this transaction would be:
Used car 7000
Cash 700
Transaction 3:
(a) Account debited: Asset
Account credited: Liability
(b) Specific account debited: Supplies
Specific account credited: Accounts payable
(c) Supplies is increased, Accounts payable is increased
(d) Normal balance of Supplies: Debit
Normal balance of Accounts payable: Credit
(e) The journal entry for this transaction would be:
Supplies 500
Accounts payable 500
Transaction 4:
(a) Account debited: Asset
Account credited: Equity
(b) Specific account debited: Accounts receivable
Specific account credited: Service revenue
(c) Accounts receivable is increased, Service revenue is increased
(d) Normal balance of Accounts receivable: Debit
Normal balance of Service revenue: Credit
(e) The journal entry for this transaction would be:
Accounts receivable 1800
Service revenue 1800
Transaction 5:
(a) Account debited: Asset
Account credited: Expense
(b) Specific account debited: Advertising
Specific account credited: Cash
(c) Advertising is increased, Cash is decreased
(d) Normal balance of Advertising: Debit
Normal balance of Cash: Debit
(e) The journal entry for this transaction would be:
Advertising 200
Cash 200
Transaction 6:
(a) Account debited: Asset
Account credited: Asset
(b) Specific account debited: Cash
Specific account credited: Accounts receivable
(c) Cash is increased, Accounts receivable is decreased
(d) Normal balance of Cash: Debit
Normal balance of Accounts receivable: Debit
(e) The journal entry for this transaction would be:
Cash 700
Accounts receivable 700
Transaction 7:
(a) Account debited: Liability
Account credited: Asset
(b) Specific account debited: Accounts payable
Specific account credited: Cash
(c) Accounts payable is decreased, Cash is decreased
(d) Normal balance of Accounts payable: Credit
Normal balance of Cash: Debit
(e) The journal entry for this transaction would be:
Accounts payable 300
Cash 300
Transaction 8:
(a) Account debited: Equity
Account credited: Asset
(b) Specific account debited: Cash
Specific account credited: Dividends
(c) Cash is decreased, Dividends is increased
(d) Normal balance of Cash: Debit
Normal balance of Dividends: Debit
(e) The journal entry for this transaction would be:
Dividends 1000
Cash 1000