The account: Record of increases and decreases in a specific asset, liability, owners’ equity, revenue, or

expense item.

Account name
Debit/Dr Crebit/Cr

If the sum of Debit entries is greater than the sum of Credit entries, the account will have a
debit balance.
If the sum of Credit entries is greater than the sum of Debit entries, the account will have a
credit balance.
1. Assets - Debits exceed credits.
2. Liabilities – Credits exceed debits.
3. Normal balance is on the increase side.
4. Owner’s investments and revenues increase owner’s equity (credit).
5. Owner’s drawings and expenses decrease owner’s equity (debit).
6. The purpose of earning revenues is to benefit the owner(s).
7. The effect of debits and credits on revenue accounts is the same as their effect on
Owner’s Capital.
8. Expenses have the opposite effect: expenses decrease owner’s equity.

The equation must be in balance after every transaction. Total Debits must equal
total Credits.
Business documents, such as a sales slip, a check, or a bill, provide evidence of the transaction.
The journal:

 Book of original entry.

 Transactions recorded in chronological order.
 Contributions to the recording process:
1. Discloses the complete effects of a transaction.
2. Provides a chronological record of transactions.
3. Helps to prevent or locate errors because the debit and credit amounts can be easily
compared.
EX: Kate Browne engaged in the following activities in establishing her salon, Hair It Is:
1. Opened a bank account in the name of Hair It Is and deposited $20,000 of her own
money in this account as her initial investment.
2. Purchased equipment on account (to be paid in 30 days) for a total cost of $4,800.
 3. Interviewed three persons for the position of hair stylist.
Prepare the entries to record the transactions.
Dr. Cash 20000
Cr. Owner’s capital 20000
Dr. Equipment 4800
Cr. Account payable 4800

The Ledger (Sổ cái): General Ledger contains all the asset, liability, and owner’s equity accounts.
REMEMBER: IN THEORY, LEDGER IS T-ACCOUNT

Trial Balance: Bảng cân đối thử

In T account: ending balance=Beginning balance+ increases-decreases
Trial may balance even when:
1. A transaction is not journalized.
2. A correct journal entry is not posted.
3. Incorrect accounts are used in journalizing or posting.
4. Offsetting errors are made in recording the amount of a transaction.
Dollar Signs
1. Do not appear in journals or ledgers.
2. Typically used only in the trial balance and the financial statements.
3. Shown only for the first item in the column and for the total of that column.
Do not use positive or negative marks
Snowgo company
Trial balance
December 31, 2017
Debit Credit
Cash $7000
Equipment 88000
Accounts receivable 4000
Pre-paid insurance 6000
Accounts payable 22000
Notes payable 19000
Salaries and wages payable 2000
Owner’s capital 20000
Owner’s drawing 8000
Service revenue 95000
S and W expense 42000
Utilities expense 3000
158000 158000

BE2-1 For each of the following accounts, indicate the effects of (a) a debit and (b) a credit on
the accounts and (c) the normal balance of the account.
1. Accounts Payable. (Increase credit, decrease debit, credit balance)
4. Accounts Receivable. (Increase debit, decrease credit, debit balance)
2. Advertising Expense. (Debit balance)
5. Owner’s Capital. (Credit balance)
3. Service Revenue. (Credit balance)
6. Owner’s Drawings. (Debit balance)
BE2-2 Transactions for the Tage Oslo Company for the month of June are presented below.
Identify the accounts to be debited and credited for each transaction.
June 1 Tage Oslo invests $5,000 cash in a small welding business of which he is the sole
proprietor. (Debit cash, Credit capital)
2 Purchases equipment on account for $2,400. (Debit equipment, credit account
payable)
3 $800 cash is paid to landlord for June rent. (Credit cash, debit expense)
12 Sends a bill to J. Kronsnoble for $300 for welding work performed on account. (Debit
account receivable, credit revenue)
BE2-3 Using the data in BE2-2, journalize the transactions.
June 1
Cash 5000
Owner’s capital 5000
2
Equipment 2400

Accounts payable 2400

3
Expense 800
Cash 800
12
Accounts receivable 300
Service Revenue 300
BE2-5 M. Gonzales has the following transactions during August of the current year. Indicate
(a) the effect on the accounting equation and
(b) the debit-credit analysis illustrated on pages 61–65 of the textbook.
Aug. 1 Opens an office as a financial advisor, investing $8,000 in cash.
4 Pays insurance in advance for 6 months, $1,800 cash.
16 Receives $3,600 from clients for services performed.
27 pays secretary $1,000 salary
a) Aug. 1: The assets cash increased; the owner’s equity owner’s capital increased.
Aug. 4: The assets prepaid insurance increased; the assets cash decreased.
Aug. 16: The cash increased; The service revenue increased.
Aug. 27: The cash decreased; the expenses increased.
b) Aug. 1: Debit increased assets: Debit cash $8000; Credit increased O E: Credit O C 8000.
Aug. 4: Debit assets prepaid insurance 1800; credit assets cash 1800.
Aug. 16: Debit assets cash 3600; Credit revenue 3600.
Aug. 27: Credit assets cash 1000; debit expense 1000.
BE2-10 An inexperienced bookkeeper prepared the following trial balance. Prepare a correct
trial balance, assuming all account balances are normal.
Cappshaw company
Trial balance
December 31. 2017
Debit Credit
Cash $10800
Prepaid Insurance 3500
Accounts Payable 3000
Unearned Service revenue 2200
Owner’s capital 9000
Owner’s drawing 4500
Service revenue 25600
Salaries & Wages expense 18600
Rent expense 2400
39800 39800
E2-2 Selected transactions for A. Mane, an interior decorator, in her first month of business,
are as follows.
Jan. 2 Invested $10,000 cash in business.
3 Purchased used car for $3,000 cash for use in business.
9 Purchased supplies on account for $500.
11 Billed customers $2,400 for services performed.
16 Paid $350 cash for advertising.
20 Received $700 cash from customers billed on January 11.
23 Paid creditor $300 cash on balance owed.
28 Withdrew $1,000 cash for personal use by owner.
Instructions
For each transaction, indicate the following.
(a) The basic type of account debited and credited (asset, liability, owner’s equity).
(b) The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.).
(c) Whether the specific account is increased or decreased.
(d) The normal balance of the specific account.

Account Debited/credited
Transaction a) Basic b) Specific c) Effect d) Normal
type account balance
Jan 2 Asset Cash Increase Debit
Owner’s equity Owner’s capital Increase Credit
3 Asset Equipment Increase Debit
Asset Cash Decrease Debit
9 Asset Supply Increase Debit
Liability Account payable Increase Credit
11 Asset Account Increase Debit
receivable
Owner’s equity Revenue Increase Credit
16 Asset Cash Decrease Debit
Owner’s equity Advertising Increase Debit
expense
20 Asset Cash Increase Debit
Asset Account Decrease Debit
receivable
23 Asset Cash decrease Debit
Liability Account payable decrease credit
28 Owner’s equity Owner’s increase Debit
drawing
asset cash decrease debit

E2-4 The following information relates to Sanculi Real Estate Agency.

Oct. 1 Alan Sanculi begins business as a real estate agent with a cash investment of
$15,000.
2 Hires an administrative assistant.
3 Purchases office furniture for $1,900, on account.
6 Sells a house and lot for R. Craig; bills R. Craig $3,800 for realty services performed.
27 Pays $1,100 on the balance related to the transaction of October 3.
30 Pays the administrative assistant $2,500 in salary for October.
Instructions Prepare the debit-credit analysis for each transaction as illustrated on pages 61–
65.
Oct. 1: Debit cash 15000; Credit owner’s capital 15000.
2: No transaction.
3: Debit equipment 1900; Credit account payable 1900.
6: Debit account receivable 3800; Credit revenue 3800.
27: Credit cash 1100; debit account payable 1100.
30: Debit wage expense 2500; Credit cash 2500.
E2-5 Transaction data for Sanculi Real Estate Agency are presented in E2-4.
Instructions Journalize the transactions. (You may omit explanations).
October 1
Cash 15000
Owner’s capital 15000
October 2
No entry
October 3
Equipment 1900
Account payable 1900
October 6
Account receivable 3800
Service revenue 3800
October 27
Account payable 1100
Cash 1100
October 30
Wages Expense 2500
Cash 2500
E2-9 Selected transactions from the journal of June Feldman, investment broker, are
presented below.
Instructions (a) Post the transactions to T-accounts. (b) Prepare a trial balance at August 31,
2017.
a)

Cash
Debit Credit
Aug.1
5000 Note payable
10
2600 Debit Credit
12
12
2300
2700
31
900
Bal. 6200

Equipment Account receivable

Debit Credit
Aug 12 Debit Credit
5000
Aug.25
1700
31
900
Bal. 800
Service revenue
Debit Credit
Owner’s capital Aug 10
Debit Credit 2600
Aug 1 25
5000 1700
Bal. 4300
b)

June Feldman, investment broker

Trial balance
August 31
Debit credit
Cash 6200
Equipment 5000
Account receivable 800
Note payable 2700
Owner’s capital 5000
Service revenue 4300

$12000 $12000

P2-1A Holz Disc Golf Course was opened on March 1 by Ian Holz. The following selected
events and transactions occurred during March.
Mar. 1 Invested $20,000 cash in the business.
3 Purchased Rainbow Golf Land for $15,000 cash. The price consists of land $12,000, shed
$2,000, and equipment $1,000. (Make one compound entry.) Paid advertising expenses of
$900.
6 Paid cash $600 for a one-year insurance policy.
10 Purchased golf discs and other equipment for $1,050 from Stevenson Company payable in
30 days.
18 Received $1,100 in cash for golf fees (Holz records golf fees as service revenue).
19 Sold 150 coupon books for $10 each. Each book contains 4 coupons that enable the holder
to play one round of disc golf.
25 withdrew $800 cash for personal use.
30 Paid salaries of $250.
30 Paid Stevenson Company in full.
31 Received $2,700 cash for golf fees.
Holz Disc Golf uses the following accounts: Cash, Prepaid Insurance, Land, Buildings,
Equipment, Accounts Payable, Unearned Service Revenue, Owner’s Capital, Owner’s
Drawings, Service Revenue, Advertising Expense, and Salaries and Wages Expense.
Instructions Journalize the March transactions.
March 1 Cash 20000
Owner’s capital 20000
3 Land 12000
Buildings 2000
Equipment 1000
Advertising Expense 900
Cash 15900
6 Prepaid insurance 600
Cash 600
10 Equipment 1050
Accounts payable 1050
18 Cash 1100
Service revenue 1100
19 Cash 1500
Service revenue 1500
25 Owner’s drawing 800
Cash 800
30 Salaries expense 250
Account payable 1050
Cash 1300
31 Cash 2700
Service revenue 2700
P2-2A Emily Valley is a licensed dentist. During the first month of the operation of her
business, the following events and transactions occurred.
April 1 Invested $20,000 cash in her business.
1 Hired a secretary-receptionist at a salary of $700 per week payable monthly.
2 Paid office rent for the month $1,100.
3 Purchased dental supplies on account from Dazzle Company $4,000.
10 Performed dental services and billed insurance companies $5,100.
11 Received $1,000 cash advance from Leah Mataruka for an implant.
20 Received $2,100 cash for services performed from Michael Santos.
30 Paid secretary-receptionist for the month $2,800.
30 Paid $2,400 to Dazzle for accounts payable due.
Emily uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable, No.
126 Supplies, No. 201 Accounts Payable, No. 209 Unearned Service Revenue, No. 301 Owner’s
Capital, No. 400 Service Revenue, No. 726 Salaries and Wages Expense, and No. 729 Rent
Expense.
Instructions (a) Journalize the transactions. (b) Post to the ledger accounts. (c) Prepare a trial
balance on April 30, 2017.
A)
April 1 Cash 101 20000
Owner’s capital 301 20000
Not a transaction
April 2 Rent expense 729 1100
Cash 101 1100
April 3 Supplies 126 4000
Accounts payable 201 4000
April 10 Accounts Receivable 112 5100
Service revenue 400 5100
April 20 Cash 101 1000
Service revenue 400 1000
April 30 Salaries and wages expense 726 2800
Cash 101 2800
Accounts payable 201 2400
Cash 101 2400