ANSWERS TO DISCUSSION QUESTIONS AND

SM-21 2

Debits and Credits:

Analyzing and Recording Business Transactions

ANSWERS TO DISCUSSION QUESTIONS AND

CRITICAL THINKING/ETHICAL CASE

• A ledger is a group of accounts that records in monetary value data from business transactions.
• Because that is always the debit side. It is an arbitrary rule.
• False. Accounts with one entry will not need footings.
• The end product of the accounting process is preparing financial statements.
• The transaction analysis chart is a teaching device that is not used in the regular accounting process.
• Accounts affected, category, ↑↓rules, update of T accounts.
• The analysis of transactions results in the total of debits being equaled to the total of credits. A double-entry

system provides a system of checks and balances.

• False. Informal report; does not have the same status as financial statements.
• The financial statements are prepared from the ending balances of the accounts (debit or credit) in the ledger.

These ending balances are then used on financial statements. The inside columns on financial statements are for subtotaling.

• It is easier to prepare the reports from the trial balance, because a list of all accounts and their balances is

provided. The columns for revenue, expenses, etc., on the expanded accounting equation do not list specific titles and their balances.

• The question in this case is whether Audrey should be allowed to put fictitious figures into the trial balance.

Although Audrey has good intentions in this case, I would not support this type of behavior. Her behavior is extremely unprofessional and goes against all accounting standards. Instead of putting in fictitious figures, Audrey should stay late and correct the trial balance (or maybe have an assistant help her so she could catch the plane).

College Accounting 12th Edition Slater Solutions Manual Visit TestBankDeal.com to get complete for all chapters

SM-22

CHAPTER 2 SOLUTIONS TO CLASSROOM DEMO NSTRATION EXERCISES

SET A

• Cash $13,900 Debit Balance

Ken Dalton, Capital $24,000 Credit Balance

• Liability Cr. Dr. Cr.
• Revenue Cr. Dr. Cr.
• Asset Dr. Cr. Dr.
• Capital Cr. Dr. Cr.
• Withdrawal Dr. Cr. Dr.
• Asset Dr. Cr. Dr.
• Expense Dr. Cr. Dr.

3.Cash 500 Cash Asset ↑ Dr.Acc. Rec.4,500 Accounts Receivable Asset ↑ Dr.

Legal Fees Earned 5,000 Legal Fees Earned Revenue ↑ Cr.

SM-23

• Cash

Accounts Receivable Office Equipment Accounts Payable

• O’Mally, Capital
• O’Mally, Withdrawals

Hair Salon Fees Earned Advertising Expense Salary Expense Selling Expense

5. A. BS

• BS
• BS
• BS
• OE
• OE
• IS
• IS

I. IS

J. IS

• IS

SM-24

SOLUTIONS TO EXERCISES

Set A 2A-1. Balance Sheet Accounts Assets 111 Cash 112 Accounts Receivable 121 Panasonic HD Television Liabilities 211 Accounts Payable Owner's Equity 311 L. Janas, Capital 312 L. Janas, Withdrawals

Income Statement Accounts Revenue 411 Legal Fees Earned Expenses 511 Salary Expense 512 Repair Expense 513 Advertising Expense 2A-2.

1.Accounts Affected 2.Category 3.

↑↓

4.Rules 5.T-Account Update Computer Equipment Computer Equipment Asset ↑ Dr.

26,000

Cash Cash Asset ↓ Cr.9,000 Accounts Payable Accounts Payable Liability ↑ Cr.

17,000